Opposition Brief — Adams v. Pension Benefit Guaranty Corp (No. 06-145)

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’ Qupreme Cons, US,

No. 06-145 "AUG 25 2006

CLERK

IN THE

Supreme Court of the Ginited States

ALLEN D. ADAMS, II, et ai.,

Petitioners,

PENSION BENEFIT GUARANTY CORPORATION AND

PICHIN CORPORATION,

Respondents.

On Petition for a Writ of Certiorari to the

United States Court of Appeals

for the District of Columbia Circuit

RESPONDENT PICHIN CORPORATION’S

BRIEF IN OPPOSITION TO THE

PETITION FOR WRIT OF CERTIORARI

ANDREW T. KARRON

Counsel of Record

DAVID P. GERSCH

GRAHAM J. JENKINS

ARNOLD & PORTER LLP

555 Twelfth Street, N.W.

Washington, D.C. 20004-1206

(202) 942-5000

Counsel for Respondent

August 25, 2006 Pichin Corporation

WILSON-EPES PRINTING Co., INC. — (202) 789-0096 — WASHINGTON, D.C. 20001

QUESTION PRESENTED

During a Chapter 11 proceeding involving a bankrupt

airline, the Pension Benefit Guaranty Corporation (“PBGC”)

entered into a court-approved Comprehensive Settlement

Agreement that was negotiated in 1992 among all affected

parties, including (1) the debtor airline, (ii) the PBGC, (iii) the

collective bargaining representatives of the airline’s em-

ployees, and (iv) representatives of the airline’s controlling

shareholder. That settlement was the linchpin of a successful

Chapter 11 reorganization of the debtor airline that enabled

the airline’s employees to keep their jobs, provided that the

airline’s existing defined benefit pension plans would con-

tinue in operation and receive funding from the reorganized

entity and related entities (as they did for many years),

provided for the future termination of the pension plans upon

the occurrence of certain potential defined “Significant

Events,” and provided that, in the event of such termination,

the related entities’ termination payments would be capped at

$240 million.

Did the PBGC have authority under the Employee

Retirement Income Security Act of 1974, 29 U.S.C. § 1001

et seg. (“ERISA”), to enter into the Comprehensive Settle-

ment Agreement?

RULE 29.6 CORPORATE DISCLOSURE STATEMENT

The following are parent companies or any publicly held

company that has a 10% or greater ownership interest (such

as stock or partnership shares) in Pichin Corporation:

Arnos Corp.

Unicorn Associates Corporation

ACF Industries Holding Corp.

Highcrest Investors Corp.

Buffalo Investors Corp.

Starfire Holding Corporation

NM Holding Corporation.

These representations are made in order that Justices of this

Court may determine the need for recusal. As such, we have

erred on the side of caution and have construed the term

“parent” broadly. Pichin Corporation does not admit that any -

listed entities are parent corporations for purposes other than

this Disclosure Statement.

TABLE OF CONTENTS

TRIE FIO FR cevrsecsetkesnicceiscasisieresinaccenvaniss

RULE 29.6 CORPORATE DISCLOSURE

FET TEE. Aeicnisilisvsssdaaiidicenccubascscintieiieanteseice

PE, Ae AT ee Hee rite ctencesccitionschinpessspeiotsonens

STATUTORY PROVISIONS INVOLVED .................

COUNTER-STATEMENT OF THE CASE ....ssesessessss

es)

The CSA Is Adopted As Part Of TWA’s

Bankruptcy Re-Organization In 19972................

The PBGC Terminates The Plan And The

Pilots’ Union Files A Lawsuit Atiacking The

_ ity SReRa ena Nen Veperel aeryPey sane wae ae Gceatacwuioveen

The Pilots File A Second Lawsuit Attacking

PA tisceictieleisassnvetendinansdcatabiparcunceds

The Court Of Appeals Issues The 2003 Allied

Pilots Decision Upholding The PBGC’s

Authority To Enter Into The CSA...

The Pilots Amend Their Complaint And File

A Third Lawsuit Attacking The CS.A, And The

District Court Dismisses Both Cases.................

The Court Of Appeals Affirms The District

Court On Both Grounds And Adopts Its

NELLA ane lee Pw RE Gia Ae OTE NE

REASONS FOR DENYING THE WRIT..............:008

THERE IS NO CONFLICT AMONG THE

Ce Ne acsaks titcccenic sag dace epabdinictiatarhotealeaaeecoinibc

: (ili)

IT.

Il.

TABLE OF CONTENTS—Continued

THE UNIQUE PROCEDURAL CIRCUM-

STANCES: OF THIS CASE ESTABLISH

SUBSTANTIAL EQUITABLE DEFENSES

THAT RENDER IT AN INAPPROPRIATE

VEHICLE FOR ADDRESSING’ THE

ISSUE OF THE PBGC’S SETTLEMENT

PEG? EERE 5 Hodis ab udiiGladetomunies

ERISA AUTHORIZED THE CSA’S

TERMINATION LIABILITY SETTLEMENT

PE MNT siiecibviistoceticesecianeaessieoniphatineniniens

A. The Statutory Language Authorized The

BDOCICINCI AGTOCICIil 5.55..cccersssecccsosnesesersses

B. The Legislative History Further Supports

The PBGC’s Statutory Authority To Enter

Into Liability Settlements Like the CSA .....

I ek airs iscrrrivenidelnntiapuesssecinicgbasadormlasaulonions

APPENDIX

Page

TABLE OF AUTHORITIES

CASES

Adams v. Pension Benefit Guar. Corp.,

332 F. Supp. 2d 231 (D.D.C. 2004),

Page

aff'd 170 Fed. Appx. 142 (D.C. Cir. 2006) .....3, 10, 11

Adams v. Pension Benefit Guar. Corp.,

170 Fed. Appx. 142 (D.C. Cir. 2006) .....cessssse

Aerojet-Gen. Corp. v. Askew,

BES ke FE CHAR Me BF EDD iciiinicrsecsceesiviiterseess

Air Line Pilots Ass’n, Int'l v.

Pension Benefit Guar. Corp.,

193 F. Supp. 2d 209 (D.D.C. 2002),

aff'd sub nom, Allied Pilots Ass’n v.

Pension Benefit Guar. Corp.,

SIR Te Fo IA Li BID Price recevasceticoneretien

Allied Pilots Ass’n v.

Pension Benefit Guar. Corp.,

Fa FE Fd A Se OR aricresteteisenctnneseseene

Brown v. PBGC,

821 F. Supp. 26 (D.D.C. 1993).......sssecssssecssseees

Commodity Futures Trading Comm'n v. Schor,

TE Ae IE COMED veeortenervetienetinnvermnicenteinint

Colautti v. Franklin,

A Sa Pe Ce EOE rtinciivscnnnstctehninionselinten

Costello v. United States,

we ee

Ethnic Employees of the Library of Cong. v.

Boorstin,

Fae Wee BOOS GL CA, PI a )ivieceeccscesververiscces

Expert Elec., Inc. v. Levine,

Se klk FEET CEU Gs BOTT D vesarateesrrcrccitaresiens

Fed. Power Comm’n v. Colo. Interstate Gas Co.,

PO re I FFD caccicenoovsentbrdscclouicbaceece

First Am. Disc. Corp. v.

Commodity Futures Trading Comm’n,

Sek FSO IOS (D.C, Cop. 20D i cvcvcccccsscevesenivis

TABLE OF AUTHORITIES—Continued

Page

Fotta v. Trustees of the United Mine Workers

of Am., Health & Ret. Fund,

BOS Fe Let Ce as SEE eatittentnocetoceerintenns 16

Frito Lay, Inc. v. LTV Steel Co. (In re

Chateaugay Corp.),

SOF Fee Oe GC Ce, TD ova vrscsrecescsccsiesenveciones 18

Halliburton Serv. v. Crystal Oil Co.

(In re Crystal Oil Co.),

OF i FF A ail UN saiientbcnicesiecinsponcmnenen 18

In re AOV Indus..Inc.,

$92 F206 PIAO ODL, Cae, BGG) qn cecseccnserivenesions 17

In re Continental Airlines,

PE Fe ee i FD weer se cecsiinicripeivicdennlans 17,18

In re Smart World Techs., LLC,

GaP Ok BW COE Boris ROD cticncscivscnerscneincanninnes 20

In re Specialty Equip. Cos.,

Fe Se CHE SR iiprirtericctncitersateiniis 18

In re: UAL Corp.,

SEE FSG G71 CII, FG) rstescscccticsvccvresosinvees 12

Indep. Bankers Ass’n of Am. v. Heimann,

627 F.2d 486 (D.C. Cir. 1980).........; SPF Woke ree 16

Johnson vy. Zerbst,

SO AE OR isis rehecetaictdceuannccnonn 16

Kaneb Servs., Inc. v. FSLIC,

og we Ek Lt Ae. | 2 Risemneien amamipmant™ 16

Monahan v. N.Y. City Dep't of Corr.,

ee Ie EE Ge OE Picticcntincestiensnvecienins 15

~ Nevada v. United States, f

AS EF, FEO Cee hinted otenmcreaicinliccneiiinces 14

New York Air Brake Corp. v. Gen. Signal Corp.,

873 F. Supp. 747 (N.D.N.Y. 1995)........... eee 20, 21

Vil-

TABLE + .UTHORITIES—Continued

Page

Official Comm. of Unsecured Creditors of LTV

Aerospace & Defense Co. v. Official Comm. of

Unsecured Creditors of LTV Steel Co. (In re

Chateaugay Corp.),

FPR egy oe 5 | Ne enn 17

Parklane Hosiery Co. v. Shore,

BF UE ee RiP IO iiteiiitainiarascdalnascenninatioteeions 14

Pension Benefit Guar. Corp. v. Icahn, et al.,

No. 4:92-cv-00371-DBB (W.D. Mo. 1992)...... 4

Pension Benefit Guar. Corp. v. LTV Corp.,

NE i SA EE sn cearndcdenslantevsGiaainncccinetnanite 21,24

Skidmore v. Swift & Co.,

Be es FOIE CED iiotisavnereneder dettaslinigentisnnbhes 21

South Carolina v. Catawba Indian Tribe, Inc.,

AE hs REE Sede tctnciskedbdavionsivncousbetcneiins 20

Tahoe-Sierra Pres. Council, Inc. v.

Tahoe Reg’l Planning Agency,

SLE FS VOGE CP. CW, ZOD) i ccissicnsnccrceseciveresen 15

Trone v. Roberts Farms, Inc. (In re

Roberts Farms, Inc.), :

G52 F208 Fas Cr C, TOG irks hdtv 18

Tyus v. Schoemehl,

DSF Fee ee Ce CE FO vasicctndscicsntenscccesavancinns 15

United States v. Menasche,

SOAs DO FOOSE tian tier acdenisdoitarisiianenant 20

Utah Power & Light Co. v.

Interstate Commerce Comm'n,

FOS F 26 DOS CDC, Cie TGR) cccocsrccsccsesninteniones 15

Wells Fargo Bank, N.A. v. F.D.LC.,

S108 .38 Fer CC. Ce. Distt 21

West v. Gibson,

SEF Us Ee CROAT wiccickcsiae Dbibddeaie 21

Vill

TABLE OF AUTHORITIES—Continued

Page

W. Coal Traffic League v.

Interstate Commerce Comm'n,

Pee eee Be I CHP, B9GAF).....0..<cccccssececeeess 15

STATUTES

Single-Employer Pension Plan Amendments Act

of 1986, Pub. L. No. 99-272, Title XI, 100

a cs epenanectcatonns 23

Retirement Protection Act of 1994, Pub. L. No.

103-465, Title VII(F), 108 Stat. 4809.....0.0000000.. 23

Pension Protection Act of 2006, Pub. L. No. 109-

oo seenvdceenanes 23, 24

Employee Retirement Income Security Act of

E974, ZF U.S.C. § TOOL, €f S€q. ...0000..ccscccevseseoeee 2

BR Rass OB IMIIEIDD ovvssenecsovecessevesecocreseesees Sasceea 22

iso, cc cavvsguesecsevvscecsccvsteve 20

SID avi civcenccevecssecssencvesevcecosnesseee 22, 22

RB PPI IVD). ......n-.0nsceccovecessorsnesers 4

a S.A oe 8, 18, 19, 20, 23

oo cassvevpanesvenssesevenenecs 8,11, 12, 21

ee sss ccasenatesernnevescesvoresnes mae

RULES AND REGULATIONS

29 C.F.R. § 4022.22 & app. D. (2005) ....cessseesseee 4

es saiiveweneweatvon 11, 12

LEGISLATIVE MATERIALS

H.J. Res.157, 102d Cong. § 214, 105 Stat. 1701

Nee. avveveusuuntnosewessvonvens 4

MISCELLANEOUS

Black’s Law Dictionary (6th ed., abridged, 1991).. 19

TABLE OF AUTHORITIES—Continued

Page

Pension Benefit Guaranty Corporation Fiscal Year

1992 Annual Report to Congress............ccceeeeeeees 13

Pension Benefit Guaranty Corporation Fiscal Year

1993 Annual Report To Congress ..............::c0000e 13

Pension Benefit Guaranty Corporation Fiscal Year

1994 Annual Report To Congress ...............cee 13

IN THE

Supreme Court of the Anited States

No. 06-145

ALLEN D. ADAMS, II, et al.,

Petitioners,

Vv.

PENSION BENEFIT GUARANTY CORPORATION AND

-PICHIN CORPORATION, -

Respondents,

On Petition for a Writ of Certiorari to the

United States Court of Appeals

for the District of Columbia Circuit

RESPONDENT PICHIN CORPORATION’S

BRIEF IN OPPOSITION TO THE

PETITION FOR WRIT OF CERTIORARI

STATUTORY PROVISIONS INVOLVED

A relevant statutory provision of ERISA, 29 U.S.C. § 1369,

is set forth on page 1 of the Appendix (“App.”). Other perti-

nent statutes are contained in the Appendix to the Petition.

' Consistent with the approach employed in the Petition, this brief cites

relevant provisions of ERISA according to their section numbers as

codified in title 29 of the United States Code, rather than the section

numbers in the enacted statute.

COUNTER-STATEMENT OF THE CASE

The Petition for Writ of Certiorari filed by seven former

Trans World Airlines, Inc. (“TWA”) pilots (the “Pilots” or

Petitioners”) involves yet another belated attack on the

provisions of a court-approved Comprehensive Settlement

Agreement (“CSA”) which was negotiated in 1992 by the

Pilots’ collective bargaining representative, TWA, the Pen-

sion Benefit Guaranty Corporation (“PBGC”), and others, as

part of TWA’s successful bankruptcy reorganization.”

In 1992-1993, the Pilots, through their union, the Air Line

Pilots Association, International (“ALPA”), entered into the

CSA to induce TWA’s then-owner Car] Icahn to fund TWA’s

bankruptcy reorganization and sponsor TWA’s pension plans,

including the Retirement Plan for Pilots of Trans World

Airlines, Inc. (“Plan” or “Pilots’ Plan”). ALPA signed the

CSA on behalf of the Pilots, who all were active TWA pilots

at.the time. (C.A. App. at 79-85.) ALPA warranted that it

had received all necessary authorization from its membership

to sign the CSA. (C.A. App. at 207.) Icahn and several

icahn-affiliated entities (including respondent Pichin Corpo-

ration) (collectively, “Icahn”), the PBGC, TWA and TWA’s

other unions also signed the CSA, and warranted their

authority to do so. (C.A. App. at 44-47, 203-09, 244-58.)

The United States Bankruptcy Court for the District of

Delaware approved the CSA, which was the cornerstone of

TWA’s successful Plan of Reorganization. /nfra § A. That

reorganization saved the Pilots’ jobs. Moreover, during the

next eight years, the Pilots’ statutory pension benefits

guaranteed by the Employee Retirement Income Security Act

of 1974, 29 U.S.C. § 1001, et seg. (“ERISA”) increased by up

to 44% and more than half a billion dollars in assets were

allocated to TWA’s pension plans. /nfra § A.

* The CSA _is reproduced (without exhibits) in the parties’ Joint Ap-

pendix filed in the Court of Appeals (“C.A. App.”) at 181-270.

In December 2000, when Pichin, the Icahn-affiliated entity

serving as Plan sponsor pursuant to the CSA, exercised its

CSA right to request termination of TWA’s pension plans,

ALPA filed a lawsuit challenging the very agreement it had

signed eight years earlier on behalf of all TWA pilots. The

District Court rejected ALPA’s challenge to the CSA, and the

D.C. Circuit affirmed, expressly holding that “federal law

authorizes . . . settlement agreemen’s like the one challenged

in this case... .” Allied Pilots Ass’n v. Pension Benefit

Guar. Corp., 334 F.3d 93, 95 (D.C. Cir. 2003) (“Allied

Pilets”). No further review of that judgment was sought.

Notwithstanding the D.C. Circuit’s decision upholding the

CSA in Allied Pilots, Petitioners persisted in asserting a

separate, belated challenge to the CSA. Both the District

Court and the Court of Appeals dismissed Petitioners’ follow-

on lawsuits, holding both (i) that the lawsuits were nothing

more than an attempted end-run around the Allied Pilots

decision, Adams v. Pension Benefit Guar. Corp., 332 F. Supp.

2d 231, 236 (D.D.C. 2004), aff'd 170 Fed. Appx. 142 (D.C.

Cir. 2006), Appendix to the Petition for Writ of Certiorari

(“Pet. App.) at 4, 13, and (ii) that the PBGC had full author-

ity under ERISA to settle its claims against TWA and Icahn

by entering into the CSA, including the CSA’s provision

capping Icahn’s payments upon Plan termination at $240

million, Adams, 332 F. Supp. 2d at 236-37; 170 Fed. Appx. at

142, Pet. App. at 4, 14-15. The Petition seeks review of that

judgment.

A. The CSA Is Adopted As Part Of TWA’s

Bankruptcy Re-Organization In 1992.

TWA filed for Chapter 11 benkrustey on January 31, 1992.

Air Line Pilots Ass'n, Int'l v. Pension Benefit Guar. Corp.,

193 F. Supp. 2d 209, 212 (D.D.C. 2002) (Urbina, J.), aff'd

sub nom. Allied Pilots, 334 F.3d 93. The PBGC promptly

announced its intention to terminate TWA’s pension plans,

including the Pilots’ Plan, and to pursue TWA and Icahn for

an alleged $1.124 billion in termination liability. /d. at 212-

13. Icahn disputed the alleged liability on the ground that

Congress’s 1991 amendment of ERISA? specifically to hold

Icahn personally liable for underfunding of TWA’s pension

plans violated the U.S. Constitution. (See C.A. App. at 394.)

In response, the PBGC filed a lawsuit seeking a declaratory

judgment that the 1991 amendment was constitutional. /d.; see

also Pension Benefit Guar. Corp. vy. Icahn, et al., No. 4:92-

cv-00371-DBB (W.D. Mo. 1992).*

As TWA’s reorganization efforts developed, two inter-

related obstacles emerged. First, although the various TWA

unions offered to make wage and benefit concessions, (C.A.

App. at 389-90, 502-03), TWA failed to raise $200 million in

needed operating capital. (C.A. App. at 395.) Second, the

PBGC’s announced intention to terminate the plans and the

size of its alleged claim deterred potential sources of financ-

ing for TWA. It also threatened the TWA pilots’ pensions,

which, in the event of Plan termination, would have been

capped by the statutory limit on the PBGC’s pension guaran-

tee. In 1992, that limit was $28,000, an amount below many

of the pilots’ expected retirement benefits.” Because of their

keen interest in this issue, TWA’s pilots conditioned their

wage and benefit concessions on satisfactory resolution of the

PBGC’s claim. (C.A. App. at 394, 504-05.)

The CSA negotiated among all affected parties eliminated

these obstacles to TWA’s reorganization. The CSA provided,

among other things, that:

Icahn would loan $200 million to TWA;

* See H.J. Res. 157, 102d Cong. § 214, 105 Stat. 1701, 1718-19 (1991).

* Upon motion by the PBGC, the District Court dismissed the PBGC’s

declaratory judgment action on November 23, 1992, shortly after the

parties had successfully negotiated the major terms of the CSA.

> See 29 U.S.C. § 1322(b)(3)(B); 29 C.F.R. § 4022.22 & app. D (2005).

TWA would contribute $300 million to TWA’s pen-

sion plans;

TWA’s pension plans would not be terminated

immediately, but instead would be sponsored by an

Icahn entity (Pichin), which was responsible for

minimum funding requirements in excess of TWA’s

$300 million payment; |

If certain defined “Significant Events” occurred in

the future, the PBGC would terminate the TWA

pension plans upon a request from Pichin; and

TWA’s future potential ERISA liability in the event

of termination would be extinguished, and Icahn’s

termination payments were fixed at no more than

$240 million.

Allied Pilots, 334 F.3d at 96, 98 (citing the CSA).

The PBGC expressly represented and warranted to Icahn

that the CSA “shall constitute legal, valid, and binding con-

tracts .. . enforceable against the PBGC” and “will not violate

any provision of Title IV of ERISA,” (C.A. App. at 204-05),

and provided a formal opinion by its General Counsel that

the CSA “constitute[s] legal, valid and binding obligations of

PBGC” and “do[es] not conflict with Title 1V of ERISA... .”

(C.A. App. at 687.) Similarly, ALPA represented and war-

ranted that its execution of the CSA was “duly authorized by

all necessary action, including where necessary action of its

membership,” which included the Pilots.° (C.A. App. at

207.) In agreeing to the CSA, Icahn relied on its text and on

these express statements of authority by the PBGC and the

Pilots’ union.

° Each of the Pilots was an active TWA pilot when ALPA, the exclu-

sive collecting bargaining agent for all active TWA pilots, signed the

CSA. (C.A. App. at 26, 79-85.) ROCREEnG TY. each of the Pilots is bound

by that agreement.

The Bankruptcy Court approved the CSA in December

1992 after finding that it was essential to a successful TWA

reorganization:

it would be an extremely difficult task to propose a plan

absent resolution of those matters that have preceded

[the CSA] as well as this settlement. Absent the

negotiations that have taken place and the resolutions, it

would be likely that any plan that would be proposed

could not possibly be confirmed as originally presented.

(C.A. App. at 530) (emphasis supplied). The Bankruptcy

Court also held that:

[The Icahn $200 million] financings are critical to the

continued operation of TWA’s business and the ability

of TWA to propose a feasible plan of reorganization.

(C.A. App. at 486.)

When the Bankruptcy Court approved the CSA, none of

the TWA pilots or their union objected to it. (C.A. App. at

533-684.)’ Instead, they reaped the benefits of their bargain.

As the cornerstone of TWA’s reorganization, the CSA

enabled TWA to continue operations and the Pilots to remain

employed: TWA pilots who were already retired or who

chose to retire at the time of the CSA received: (and still

receive to this day) their full benefits. (See C.A. App. at

218). When active pilots—including Petitioners—later

retired, Pichin’s Plan sponsorship allowed them to receive

” Indeed, ALPA advocated for the CSA. (See C.A. App. at 532). The

CSA and the negotiations leading to it were no secret. They were widely

reported in the press at the time. (C.A. App. at 716-22.)

® The Petition misleadingly states that termination of the Plan “resulted

in the immediate reduction of the monthly benefit paid to petitioners and

other retired TWA pilots.” Pet. at 4. This statement is inaccurate to the

extent it includes pilots who were already retired or who chose to retire at

the time the CSA was signed. ‘

timely payment of full benefits under the Plan for several

years, rather than the lower amount that would have been

-guaranteed by the PBGC had the Plan been terminated in

1992. See Allied Pilots, 334 F.3d at 99. Finally, because the

PBGC’s guarantee cap, by law, increases annually, the eight-

year postponement in Plan termination increased the PBGC’s

statutory guarantee maximum at the time of termination by

44% over the guaranteed amount in 1992. Jd.

B. The PBGC Terminates The Plan And The Pilots’

Union Files A Lawsuit Attacking The CSA.

Eight years after the Bankruptcy Court approved the CSA,

-Pichin requested that the PBGC terminate TWA’s pension

plans as required by the CSA because “Significant Events”

had occurred. The PBGC terminated the plans effective

January 1, 2001. Allied Pilots, 334 F.3d at 96.

As the Pilots alleged in their complaint, several active and

retired TWA pilots then urged their union, ALPA, to file a

lawsuit challenging the PBGC’s termination of the Pilots Plan

pursuant to the CSA as violative of ERISA. (C.A. App. at 47

{ 88.) The District Court granted summary judgment for

defendants PBGC and Pichin, and the D.C. Circuit affirmed.

Air Line Pilots Ass’n, Int'l v. Pension Benefit Guar. Corp.,

193 F. Supp. 2d at 220-21; Allied Pilots, 334 F.3d at 99.

C. The Pilots File A Second Lawsuit Attacking The

CSA.

Six weeks after the District Court’s dismissal order, the

Pilots filed another lawsuit—Adams I, tue subject of this

Petition—challenging the CSA and Plas. termination. (C.A.

App. at 15-76.) The Pilots challe-geu the PBGC’s Plan

termination and several terms of the - +A, including its provi-

sions_capping Icahn’s termination payitients at $240 million.

The Pilots also asserted claims against ALPA, their own

collective bargaining representative, arguing that ALPA had

breached duties to them by signing the CSA and by not

seeking preliminary relief to enjoin Plan termination, (C.A.

App. at 73 § 178.) The District Court, recognizing that the

outcome of the Allied Pilots appeal could resolve the new,

nearly identical lawsuit, stayed Adams / pending the appeal.

(C.A. App, at 76.) Notwithstanding the potential impact of

the D.C. Circuit’s rulings on their rights, the Pilots never

sought to intervene in Allied Pilots, or even to file a brief

amicus curiae. |

D. The Court Of Appeals Issues The 2002 Allied Pilots

Decision Upholding The PBGC’s Authority To

Enter Into The CSA.

In Allied Pilots, the D.C. Circuit affirmed the District

Court’s dismissal and decisively rejected the belated ERISA

attack on the CSA and the PBGC’s termination of the pension

plan. The scope of the PBGC’s settlement authority under 29

U.S.C. §§ 1362 and 1367 was specifically discussed in the

briefs submitted to the D.C. Circuit. The PBGC’s briefs

discussed the PBGC’s settlement authority and argued that

the CSA’s provisions were authorized by ERISA, specifically

sections 1367 and 1362(b)(3). See Docket No. 02-5144

(1/31/03) (Brief of Appellee PBGC) at 7-8 & 19. Sections

1362 and 1367 were quoted fully in the statutory appendix to

the PBGC’s brief. /d. The pilots’ union appellant expressly

challenged the PBGC’s interpretation of section 1367. See

Docket No. 02-5144 (2/14/03) (Reply Brief of Appellants) at

8-9, n.2.

It was in this context-that the Court of Appeals in Allied

Pilots held, at the very beginning of its opinion:

Because we conclude that federal law authorizes the

.~ PBGC to enter into settlement agreements like the one

challenged in this case, we agree with the district court

that the PBGC’s termination of TWA’s pension plans

was permissible.

Allied Pilots, 334 F.3d at 95 (emphases added). Thus, the

Court of Appeals ruled that Plan termination was legal

“{bjecause” it first “conclud{ed]” that the CSA, which in-

cluded the provision capping Pichin’s payments at $240

million, was authorized by ERISA. Jd. (emphasis added).

The Court further stated that

The PBGC’s general authority to enter into liability

settlements comes from ERISA section 4067, which

empowers the PBGC “to make arrangements with [plan]

sponsors and members of their controlled groups who

are or may become liable under [the statute] for payment

of their liability.” As the bankruptcy court found, the

PBGC entered into the CSA pursuant to its section

4067 authority. Under the CSA, Icahn agreed to accept

the ongoing role of plan sponsor and to contribute funds

to shore up the plans; in return, the PBGC agreed

to postpone—perhaps indefinitely-—its termination of -

TWA’s plans, to cap Icahn’s direct liability in the event

of termination at $240 million, and to terminate the.

plans, upon request, if Icahn received unfavorable tax

treatment concerning his status as plan sponsor. Each of

these promises and counter-promises formed an

integral part of the overall negotiated settlement, whose

purpose was to prevent honeniton altogether.

Id. at 98-99 (internal citations omitted) (bold italic emphases

added) (alteration in original).

~ Having found the CSA fully in accord with federal law, the

Court of Appeals then rejected “the pilots’ claim that the

PBGC acted arbitrarily and capriciously” in terminating the

plan pursuant to the CSA. /d. at 98. In sum, the Court of

Appeals held both that the CSA was lawful under ERISA and

that it mandated the PBGC’s termination of the pension plan.

E. The Pilots Amend Their Complaint And File A

Third Lawsuit Attacking The CSA, And The

District Court Dismisses Both Cases. —

Despite the Court of Appeals’ clear holdings in Allied

Pilots upholding the CSA and Plan termination pursuant to it,

the Pilots persisted in their new lawsuit by amending their

complaint. (C.A. App. at 77-114.) The Pilots also filed

another lawsuit in the District Court seeking a writ of manda-

mus against the PBGC, alleging that “[t]he limitation on the

Termination Liability of Pichin and its controlled group as set

forth in the [CSA] . . . violates [ERISA] and is, therefore,

void and unenforceable.” (C.A. App. at 164 § 21.) In other

words, the Pilots’ fundamental claim in both cases was that

the PBGC had no authority under ERISA to settle TWA’s and

- Icahn’s pension liabilities unless it did so by “settling” for

payment of 100% of the amount that the PBGC estimated as

the plan’s unfunded liability—a drastically different arrange-

ment than the negotiated terms of the CSA and of many other

settlements the PBGC has negotiated with plan sponsors. See

footnote 9 and § III.B, infra.

On August 25, 2004, the District Court dismissed both

cases, ruling on two alternative grounds.

First, the District Court held that stare decisis barred the

Pilots’ claims. It held that the Allied Pilots holding that

“federal law authorizes the PBGC to enter into settlement

agreements like the one challenged in this case’” was “bind-

ing precedent” that foreclosed the Pilot’s claims that the

liability settlement violated ERISA. Adams, 332 F. Supp. 2d

at 236 (quoting Allied Pilots, 334 F.3d at 95).

Second, and alternatively, the District Court held that, even

if stare decisis did not bar the Pilots’ claims, they lacked

substantive merit. /d. The District Court specifically ana-

lyzed and rejected the Pilots’ contention that the termination

liability settlement in the negotiated CSA was a prohibited

“transaction to evade liability” within the meaning of 29

U.S.C. § 1369(a). /d. at 236-37. It also held that. ERISA’s

provisions authorizing the PBGC to agree to “alternative

arrangements for the satisfaction of [ ] liability’ was “an

express grant of settlement authority” that authorized the

CSA, including the $240 million settlement payment cap. /d.

at 237. And it found further authority for the settlement in 29

U.S.C. § 1367, upon which the Court of Appeals in Allied

Pilots had relied in upholding the implemen. ion of the CSA.

Id. The District Court therefore concluded that “the CSA

constitutes a statutorily authorized arrangement to settle

unfunded liability ....” Jd.

F. The Court Of Appeals Affirms The District Court

On Both Grounds And Adopts Its Reasoning.

The Pilots appealed and, after full briefing on the merits

and oral argument, the Court of Appeals affirmed the judg-

ment of the District Court in a unanimous per curiam

Judgment issued on January 27, 2006. The Court of Appeals,

like the District Court, did not rely solely upon stare decisis

grounds, but also addressed and rejected the Pilots’ argu-

ments on the merits. The Court of Appeals Judgment ordered

... that the judgment of the district court be affirmed for

the reasons stated in the opinion of the district court,

except insofar as the district court based Part IV.C of its

decision upon the alternative ground of res judicata.

Adams v. Pension Benefit Guar. Corp., 170 Fed. Appx. 142

(D.C. Cir. 2006) (unpublished) (citation omitted), Pet. App. at

3-4. Petitioners sought rehearing en banc, which was denied

by a per curiam order issued on April 28, 2006. Pet. App.

at 1-2.

REASONS FOR DENYING THE WRIT

The Petition should be denied. Petitioners have identified

no compelling reason to grant it under the Court’s well

established criteria for granting certiorari. See S. Ct. R. 10.

Moreover, as explained below, the unique procedural circum-

stances of this case render it a poor vehicle for considering

the issue raised by Petitioners—which, in any event, was

correctly resolved by the Court of Appeals. Finally, Con-

gress’s recent enactment of comprehensive pension reform

legislation—including special provisions relating to airlines

—refutes Petitioners’ suggestion that review by this Court is

needed to assure the solvency and proper functioning of the

pension system under ERISA.

I. THERE IS NO CONFLICT AMONG THE

CIRCUITS.

Petitioners do not suggest that any conflict among the

circuits justifies review by this Court—and for good reason.

Two other decisions have addressed the issue of the PBGC’s

settlement authority under ERISA in the context of a

comprehensive bankruptcy reorganization, where (as here)

the debtor, the PBGC, and representatives of the debtor’s

employees all participated fully in the negotiations. In both

cases the courts concluded, consistent with the judgment

below, that the PBGC has authority to settle unfunded benefit

liabilities claims. See Allied Pilots, 334 F.3d at 95, 98-99; see

also In re: UAL Corp., 428 F.3d 677 (7th Cir. 2005) (citing

Allied Pilots and holding that the PBGC has authority to enter

into agreement with United Airlines to settle unfunded benefit

liabilities claims under “29 U.S.C. § 1367, which enables

PBGC to seize opportunities to avoid inefficient litigation and

to increase the certainty of its recoveries”).

Nor do Petitioners suggest any conflict with any decision

of this Court. See S. Ct. R. 10(c). Their sole claim is that the

decision below, which upheld the PBGC’s exercise of

settlement authority that the agency duly reported to Con-

gress’, and which Congress never has questioned or sought to

curtail, conflicts with Congress’s intent in enacting ERISA.

Il, THE UNIQUE PROCEDURAL CIRCUM-

STANCES OF THIS CASE ESTABLISH SUB-

STANTIAL EQUITABLE DEFENSES THAT

RENDER IT AN INAPPROPRIATE VEHICLE

FOR ADDRESSING THE ISSUE OF THE

PBGC’S SETTLEMENT AUTHORITY.

Petitioners filed this case in May 2002—nine years after

the Bankruptcy Court approved the CSA, and after the

District Court granted summary judgment against the ALPA

” See, e.g., Pension Benefit Guaranty Corporation Fiscal Year 1994

Annual Report to Congress, at 9 (C/A. App. at 851) (describing settlement

of esate $900 million termiyation liability claim against Pan Am

Corporation for $110 million); ‘Pension Benefit Guaranty Corporation

Fiscal Year 1993 Annual Report to Congress, at 13 (C.A. App. at 854)

(describing settlement of PBGC’s $700, million termination liability claim

against Continental Airlines for its joint and several liability for Eastern

Air Lines’ terminated pension plans for $21 million in cash, an airplane

trust worth $70-75 million, and approximately 5% of new Continental

common stock); id. at 13 (C.A. App. at 854) (describing settlement of

TWA’s and Icahn’s liability and the CSA’s terms, including settlement of

the $1 billion claim for the amounts set forth in the CSA); id. at 14 (C.A.

App. at 855) (describing settlement of PBGC’s $220 million termination

liability claim against CF&I! Corporation for business mterests, cash, and

other consideration estimated at a value of $33 million); Pension Benefit

Guaranty Corporation Fiscal Year 1992 Annual Report to Congress, at 15

(C.A. App. at 858) (describing CSA: “The total present value of the

TWA and Icahn commitments is $259-410 million. In return for the

minimum funding and termination commitments, PBGC has released

TWA and the Icahn group from any further liability for TWA’s pension

plans.”); id. at 16-17 (C.A. App. at 859-860) (describing potential settle-

ment with New Valley Corporation: “In May, PBGC and New Valley

reached an agreement-in principle under which PRGC would terminate a

New Valley plan that is underfunded by about $420 million. Under the

agreement, PBGC anticipates receiving a distribution of cash and securi-

ties worth between $200 and $210 million.”).

plaintiffs in the Allied Pilots lawsuit. See Pet. at 4, 7; supra

pp. 6-7. Because of Petitioners’ delay in asserting their

claims, they are subject to a variety of legal and equitable

defenses, summarized below, that Pichin raised in the District

Court and the Court of Appeals.

For that reason, this case is a poor vehicle for resolving the

question presented by Petitioners. As Petitioners themselves

assert, the PBGC has entered into other recent settlements in

airline bankruptcy cases and additional airline bankruptcies are

pending. See Pet. at 18-19. Even assuming that the PBGC’s

ongoing exercise of its settlement authority—which is long-

standing and has regularly been reported to Congress, which

has never challenged it, see infra pp. 23-24—is worthy of

review, this case is not the appropriate case in which to do so.

The defenses asserted by Pichin include the following:

Res judicata. The doctrine of res judicata bars a plaintiff

from asserting legal theories that were brought or jthat could

‘have been brought in a prior suit by the same mes or those

in privity with it. Mevada v. United States, 463 U.S. 110,

129-30 (1983). In the court below, Pichin argued that the

decision in Allied Pilots was res judicata barring the claims

that are the subject of the Petition. See Docket No. 04-5333

(9/21/2005) (Brief of Appellee/Cross-Appellant Pichin Cor-

poration) at 29-33. Because both cases arose out of the CSA

and challenged its legality, they indisputably involve the

“same cause of action.” Parklane Hosiery Co. v. Shore, 439

U.S. 322, 326 n.5 (1979).

The “same parties” requirement similarly is satisfied

because res judicata binds not only persons literally party to

the first suit but also those in privity with them. Nevada, 463

U.S. at 129-30. “[OJ]ne whose interests were adequately

represented by another vested with the authority of repre-

sentation is bound by the judgment... .” Expert Elec., Inc. v.

Levine, 554 F.2d 1227, 1233 (2d Cir. 1977). Applying this

principle to bar the Pilots from re-litigating claims brought

unsuccessfully by their union is plainly appropriate here. See

Monahan v. N.Y. City Dep't of Corr., 214 F.3d 275, 285 (2d

Cir. 2000).'° The Pilots all are former TWA pilots and

present or former ALPA members who maintained in their

original complaint that ALPA had a duty to represent them

with respect to Plan termination. "|

Alternatively, the “same parties” requirement also is satis-

fied under the principle of virtual representation. “[A] person

may be bound by a judgment even though not a party if one

of the parties to the suit is so glosely aligned with his interests

as to be his virtual representative.” Aerojet-Gen. Corp. v.

Askew, 511 F.2d 710, 719 (Sth Cir. 1975); see also Tyus v.

Schoemehl, 93 F.3d 449, 454 (8th Cir. 1996). The Court of

Appeals, which has not recognized the doctrine of virtual

representation, declined to affirm that horton of the District

Court’s judgment which held that res judicata barred one of

Petitioners’ claims. See Pet. App. at 3-4. However, were this

Court to grant the writ, Pichin will assert res judicata as an

alternative ground upon which the judgment below should be

affirmed.

Laches. A claim is barred by laches where there has been

“(1) lack of diligence by the party against whom the defense

is asserted, and (2) prejudice to the party asserting the de-

fense.” Costello v. United States, 365 U.S. 265, 282 (1961).

' See also Utah Power & Light Co. v. Interstate Commerce Comm'n,

764 F.2d 865, 871 (D.C. Cir. 1985) (member of public utility association

barred by participation of association in prior suit); W. Coal Traffic

League v. Interstate Commerce Comm'n, 735 F.2d 1408, 1410-11 (D.C.

Cir. 1984); Tahoe-Sierra Pres. Council, Inc. v. Tahoe Reg’! Planning

Agency, 322 F.3d 1064, 1082 (9th Cir. 2003).

''(C.A. App. at 79-85 4 4-10; C.A. App. at 18-25 9 6-13; C.A. App.

at 51-52.)

? See Ethnic Employee: of the Library of Cong. v. Boorstin, 751 F.2d

1405, 1411.8 (D.C. Cir. 1 2).

Equitable defenses including laches apply in ERISA actions.

Fotta v. Trustees of the United Mine Workers of Am., Health

& Ret. Fund, 165 F.3d 209, 214 (3d Cir. 1998).

This suit presents a textbook case for application of laches.

First, Petitioners were not “diligent.” They entered the CSA

to induce Icahn’s funding and to avoid Plan termination in

1992. Only after benefiting from the CSA for eight years did

Petitioners challenge its legality. Second, there has been

prejudice to Icahn, who relied on the CSA provisions Peti-

tioners belatedly challenge when he complied with the CSA’s

requirements that he loan $200 million to TWA and assume

sponsorship of the pension plan. (See C.A. App. at 184-86.)

“Equity will not protect a party that through years of silence

has created an impression of acquiescence that has led others

to make substantial financial commitments.” I/ndep. Bankers

Ass'n of Am. v. Heimann, 627 F.2d 486, 488 (D.C. Cir. 1980).

Waiver. For similar reasons, Petitioners waived any chal-

lenge to the terms of the CSA when they failed to object to

it in 1992-93. Waiver is an “intentional relinquishment or

abandonment of a known right or privilege.” Johnson v.

Zerbst, 304 U.S. 458, 464 (1938)). Petitioners were creditors

in TWA’s bankruptcy and, through their union, parties to the

CSA. Yet neither Petitioners nor their union objected to

_the CSA on the grounds Petitioners belatedly have raised in

this lawsuit.

Estoppel. “Under the doctrine of equitable estoppel, ‘a

party with full knowledge of the facts, which accepts the

benefits of a transaction, contract, statute, regulation, or order

may not subsequently take an inconsistent position to avoid

the corresponding obligations or effects.” First Am. Disc.

Corp. v. Commodity Futures Trading Comm'n, 222 F.3d

1008, 1016 (D.C. Cir. 2000) (quoting Kaneb Servs., Inc. v.

FSLIC, 650 F.2d 78, 81 (5th Cir. 1981)). Equitable estoppel

applies even to claims that challenge a federal agency’s

statutory authority. See Fed. Power Comm'n v. Colo. Inter-

state Gas Co., 348 U.S. 492, 502 (1955) (where agency con-

ditioned merger approval on exclusion of certain losses from

“cost of service” surcharges, the merged company was

estopped from challenging agency’s enforcement of the

exclusion terms because it “cannot now be allowed to attack

an officially approved condition of the merger while retaining

at the same time all of its benefits”). Having accepted the

benefits of the CSA, including preservation of their jobs and

substantial increases in guaranteed pension benefits, Peti-

tioners are equitably estopped from challenging it now.

Equitable mootness. Because Petitioners’ claims would

upset the CSA, which was the cornerstone of the TWA bank-

ruptcy reorganization, equitable mootness bars their lawsuit.

The equitable mootness doctrine bars a party from appealing

or challenging a bankruptcy court’s order when (i) no stay of

that order has been obtained or diligently pursued, (ii) the

reorganization plan has been substantially consummated, and

(iii) the relief sought in a successful appeal would upset a

portion of the confirmed and consummated reorganization

plan. Jn re AOV Indus. Inc., 792 F.2d 1140, 1147-49 (D.C.

Cir. 1986). Equitable mootness is not an Article- Ill

consideration, but a balancing of equitable and prudential

factors. Jn re Continental Airlines, 91 F.3d 553, 560 (3d Cir.

1996) (en banc). It poses a bar when, “even though effective

relief could conceivably be fashioned, implementation of that

relief would be inequitable.” Official Comm. of Unsecured

Creditors of LTV Aerospace & Defense Co. v. Official Comm.

of Unsecured Creditors of LTV Steel Co. (In re Chateaugay

Corp.), 988 F.2d 322, 325 (2d Cir. 1993).

Because Petitioners did not challenge, let alone seek a stay

of, the Bankruptcy Court’s Confirmation Order or the Order

approving the CSA, (C.A. App. at 533-684), a “strong pre-

sumption of mootness” applies to their claims. AOV, 792

F.2d at 1149. Moreover, effective and fair relief simply is not

possible without “unravel[ing] intricate transactions” and

“knock[ing] the props out from under the authorization for

every transaction that has taken place... .” Frito Lay, Inc. v.

LTV Steel Co. (In re Chateaugay Corp.), 10 F.3d 944, 952-53

(2d Cir. 1993) (quoting Trone v. Roberts Farms, Inc. (In re

Roberts Farms, Inc.), 652 F.2d 793, 797 (9th Cir. 1981))

The Bankruptcy Court ruled that “the terms of the [CSA]. . .

are each integral and mutually interdependent components of

a compromise and settlement,” (C.A. App. at 483-84), and

that the Icahn $200 million financing was “critical to the

continued operation of TWA’s business and the ability of

TWA to propose a feasible plan of reorganization.” (C.A.

App. at 486) (emphasis supplied). Icahn’s $200 million loan

and his assumption of the pension plans were premised on the

validity of the CSA’s Plan termination provisions. Petitioners

and the beneficiaries of other TWA pension plans have now

received their benefits and are not proposing to return them.

TWA, the pre-CSA sponsor of the Plan and post-CSA

Benefits Administrator, (C.A. App. at 214), has been ab-

sorbed into American Airlines. Even if it were possible to

unwind the CSA thirteen years after it was approved by the

Bankruptcy Court, the disruption caused by such unwinding

would be immense, and any relief to Petitioners would be

inequitable. See Continental Airlines, 91 F.3d at 565-66; In

re Specialty Equip. Cos., 3 F.3d 1043, 1048-49 (7th Cir.

1993); Halliburton Serv. v. Crystal Oil Co. (In re Crystal Oil

Co.), 854 F.2d 79, 81 (Sth Cir. 1988).

lL. ERISA AUTHORIZED THE CSA’S TERMINA-

TION LIABILITY SETTLEMENT PROVISIONS.

A. The Statutory Language Authorized The

Settlement Agreement.

The PBGC’s agreement to settle its claim against TWA

and Icahn for unfunded benefit liabilities is supported by

express language in ERISA authorizing the PBGC to make

“arrangements for the satisfaction of liability... .” 29

U.S.C. § 1362(b)(3) (emphasis added). The term “satis-

faction” is not limited only to full payment, but means “[t}]he

performance of a substituted obligation in return for the

discharge of the original obligation.” Black's Law Dictionary

(6th ed., abridged, 1991) (emphasis added). The PBGC may,

and did, “substitute” an alternative obligation—in this case,

all of Icahn’s counter-promises recited in the CSA, including

immediate cash contributions—to conclude that there had

been “satisfaction” of its (disputed) claim against Icahn and

TWA for unfunded benefit liabilities.

Indeed, in 1992 when the PBGC, TWA, Icahn, and the

unions agreed to the CSA, it certainly was not clear that the

PBGC was settling for less than 100% of liability. The

PBGC’s $1.124 billion claim was its estimate of the unfunded

benefit liabilities of TWA’s pension plans. Whether that

estimate was the actual amount of ERISA liability was a

question for litigation—as was the issue of whether any

amount that was ultimately adjudicated to be an unfunded

liability and that could not be recovered from TWA was

recoverable from Icahn. Moreover, if the pension plans never

terminated after TWA’s reorganization, or if estimated

unfunded benefit liabilities were less than $240 million upon

termination, the PBGC would get a full recovery. The same

issue would arise if, for example, the PBGC accepted

securities in lieu of cash (which ERISA expressly permits, see

29 U.S.C. § 1362(b)(2)(A)), and those securities later sub-

stantially decreased in value. The Pilots’ reading of the

statute would require the agency to have perfect foresight.

The PBGC’s authority to settle for less than full estimated

liability also derives from the structure of 29 U.S.C. § 1362(b).

That section, which addresses a plan sponsor’s liability to the

PBGC upon termination, has three subsections: “(1) Amount

of liability”; “(2) Payment of liability”; and ‘“(3) Alternative

arrangements.” Placing subsection (3)’s “alternative arrange-

ments for the satisfaction of liability” clause outside the more

specific subsection discussing means for “payment” of liabil-

ity, indicates that the PBGC’s authority to make “alternative

arrangements” is in addition to and separate from the more

limited “payment” terms in Section 1362(b)(2). In Section

1362(b)(2)(B), Congress provided that the PBGC must offer

deferred payment to plan sponsors. 29 U.S.C. § 1362(b)(2)(B)

(“Any such terms prescribed by the corporation shall provide

for deferral . . . .”) (emphasis added). To read the separate

section for “alternative arrangements” to mean that the PBGC

is authorized only to offer “deferred payment”—a term not

mentioned in subsection 1362(b)(3)—would wrongly render

subsection 1362(b)(3) duplicative and superfluous. See South

Carolina v. Catawba Indian Tribe, Inc., 476 U.S. 498, 510

n.22 (1986) (“It is an ‘elementary canon of construction that a

statute, should be interpreted so as not to render one part

inoperative.’”) (quoting Colautti v. Franklin, 439 U.S. 379,

392 (1979); see also United States v. Menasche, 348 U.S.

528, 538-39 (1955) (“It is our duty to give effect, if possible,

to every clause and word of a statute.”) (internal quotation

marks and citation omitted). In contrast, interpreting “alter-

native arrangements” to include authority for the CSA’s terms

for an immediate cash infusion into the plans, a new plan

sponsor, guaranteed termination liability payments, and con-

tinuation of the plans as “element[s] of a liability settlement

aimed at preventing termination altogether,” Allied Pilots,

334 F.3d at 98, gives meaning to each subsection of Section

1362.

Moreover, other provisions of ERISA also authorized the

CSA. First, 29 U.S.C. § 1302(b)(1) expressly provides that

the PBGC may “sue and be sued,” which is an implicit

authorization to settle. See, e.g., In re Smart World Techs.,

LLC, 423 F.3d 166, 174-75 (2d Cir. 2005) (finding that

trustee’s statutory power to sue and be sued “presumably

includes the derivative power to settle suits”); New York Air

Brake Corp. v. Gen. Signal Corp., 873 F. Supp. 747, 753

(N.D.N.Y. 1995) (“[[]t is inherent in the adversarial system in

which this country operates, that parties to litigation or

dispute hold the authority to settle that litigation or dispute

outside the confines of the court at any time before, during,

or after the conduct of the proceedings.”). Second, 29 U.S.C.

§ 1367 broadly authorizes the PBGC to “make arrangements

with contributing sponsors and members of their controlled

groups who are or may become liable under section 1362,

1363, or 1364 of this title for payment of their liability,

including arrangements for deferred payment of amounts of

liability to the corporation accruing as of the termination date

on such terms and for such periods as the corporation deems

equitable and appropriate.” This broad language, which

recognizes that the PBGC may make arrangements “includ-

ing”—but not limited to—arrangements for deferred pay-

ment, is broad enough to encompass settlements of contested

claims in the context of a bankruptcy reorganization. See

West v. Gibson, 527 U.S. 212, 217 (1999) (“[T]he preceding

word ‘including’ makes clear that the authorization is not

limited to the specified remedies there mentioned ... .”).

The PBGC’s interpretation of ERISA to authorize the

CSA, including the $240 million payment cap, was the most

reasonable construction of the statute. Moreover, that expert

interpretation of ERISA is entitled to deference. See Pension

Benefit Guar. Corp. v. LTV Corp., 496 U.S. 633, 648 (1990)

(applying Chevron deference to the PBGC’s decision to

restore terminated pension plan).'? In ERISA, Congress gave

the PBGC a “broad” “grant of authority,” L7V, 496 U.S. at

648, to (1) “encourage the continuation and maintenance of

"In light of the PBGC’s longstanding and consistent interpretation of

its settlement authority, as well as the plain statutory language quoted

above, this Court need not decide whether Chevron deference applies to

the PBGC’s actions in order to affirm. Because the PBGC is “charged

with administering this highly detailed regulatory scheme,” this Court

Should extend considerable weight to the PBGC’s “‘body of experience

and informed judgment’” concerning the statute it enforces. Wells Fargo

Bank, N.A. v. F.D.L.C., 310 F.3d 202, 208 (D.C. Cir: 2002) (quoting Skid-

more v. Swift & Co., 323 U.S. 134, 140 (1944)).

voluntary private pension plans for the benefit of their partici-

pants,” (2) “provide for the timely and uninterrupted payment

of pension benefits to participants and beneficiaries,” and (3)

“maintain [plan sponsor] premiums . . . at the lowest level

consistent with carrying out [PBGC’s] obligations under

[Title [V of ERISA].” 29 U.S.C. § 1302(a). The PBGC was

uniquely positioned to determine how it could most effec-

tively carry out these sometimes competing statutory duties in

1992. See Brown yv. PBGC, 821 F. Supp. 26, 31 (D.D.C.

1993) (noting need to defer to the PBGC in light of its

arguably competing statutory duties). It chose to perform

those duties by entering into the CSA, which permitted the

confirmation of the TWA reorganization plan and uninter-

rupted pension payments to Plan beneficiaries for nearly a

decade. This Court should extend deference to that complex

decision.

B. The Legislative History Further Supports The

PBGC’s Statutory Authority To Enter Into

Liability Settlements Like the CSA.

The Petitioners wrongly assert that the legislative history of

ERISA demonstrates that the PBGC exceeded its statutory

authority by entering into the CSA. To the contrary, the -

legislative history evidences Congress’s approval of liability

settlements like the CSA.

The Pilots’ reliance on the now-defunct Section 1304(f)

provisions is misplaced. Pet. at 14-17. While ERISA, as

originally enacted, specifically granted the PBGC temporary

transition authority to remove recently terminated plans from

the operation of the new statute’s complicated provisions, this

does not mean that other provisions of the statute did: not

grant the PBGC broad authority to enter into liability set-

tlements. Congress understandably sought to avoid disrupt-

ing settled expectations that could be affected by a new,

comprehensive regulatory scheme by specifically providing

that the brand new regulatory agency would have maximum

flexibility during the initial implementation of ERISA.

Importantly, however, and as the Pilots concede, in 1986

Congress repealed 29 U.S.C. § 1304(f)(4) and ERISA’s other

moribund emergency provisions. Pet. at 15 n.7 (citing Pub.

L. No. 99-272, Title XI, § 11016(c)(6), April 7, 1986, 100

Stat. 82). During that comprehensive restructuring of ERISA,

Congress reinforced the PBGC’s settlement authority by

adding the express statutory language codified at Section

1362(b)(3) authorizing the PBGC to reach—in addition to

deferral of payments under subsection (b)(2)—alternative

“arrangements for the satisfaction” of termination liability.

Single-Employer Pension Plan Amendments Act of 1986,

Pub. L. No. 99-272, Title XI, § 11011{a)(2), 100 Stat. 82,

253-57. The PBGC signed the CSA six years later. The

repealed temporary provisions of ERISA are inapposite.

Moreover, the PBGC’s interpretation of ERISA to give the

agency authority to compromise termination liability amounts

has been longstanding, public, and expressly reported to

Congress each year. See C.A. App. at 849-60 and footnote 9,

supra. If, as Petitioners suggest, Congress intended to require

the PBGC to settle for the full amount of the PBGC’s

estimated liability, one would have expected Congress to

remedy such persistent flouting of legislative intent—par-

ticularly when Congress comprehensively reviewed and

amended ERISA in | %4 and again in 2006 to remedy under-

funding of the PBGC s reserves. See Pension Protection Act

of 2006, Pub. L. No. 109-280, 120 Stat. 780; Retirement

Protection Act of 1994, Pub. L. No. 103-465, Title VII(F),

108 Stat. 4809, 5012-50.

Petitioners’ suggestion that review is needed to correct the

PBGC’s reading of ERISA and thereby rescue the nation’s

pension system is belied by Congress’s recent enactment of

comprehensive pension reform legislation that does not

diminish the settlement authority that the PBGC repeatedly

has exercised and reported to Congress. Although Congress’s

stated purpose in revisiting ERISA was to once again address

the PBGC’s growing deficit, nothing in the recent amend-

ments restricted or otherwise limited the PBGC’s settlement

authority. To the contrary, the Pension Protection Act of

2006 includes special provisions-intended to reduce the

pension burden on the airline industry. See Pub. L. No. 109-

280, § 402, 120 Stat. 780, 922 et seq.

“[W]hen Congress revisits a statute giving rise to a

longstanding administrative interpretation without pertinent

change, the congressional failure to revise or repeal the

agency’s interpretation is persuasive evidence that the

interpretation is the one intended by Congress.” Commodity

Futures Trading Comm'n v. Schor, 478 U.S. 833, 846 (1986)

(internal quotation marks and citation omitted); see also LTV,

496 U.S. at 650 (where “Congress was aware of the action

taken by the PBGC” and did not amend ERISA, “[tJhe

conclusion that Congress thought the PBGC was properly

exercising its authority is at least as plausible as any other’).

Congress’s acquiescence in the PBGC’s consistent inter-

pretation of ERISA is understandable, since Petitioners’

proposed reading would harm the very workers ERISA was

enacted to protect. Petitioners’ reading of the statute would

force the PBGC to litigate every termination liability case,

thereby wasting an enormous amount of resources that

otherwise would be used to pay guaranteed benefits and

foreclosing the possibility of termination liability settlements

that—because of the pitfalls of litigation and the uncertainty

of judgment collection—would benefit all parties, including -

plan participants. Moreover, the prolonged litigation that

inevitably would arise in bankruptcy cases involving huge

pension plans where the PBGC is a major creditor would

foreclose Chapter 11 reorganization of distressed companies

and force their liquidation. It is inconceivable that Congress

intended such an expensive, socially disruptive result.

CONCLUSION

The Petition should be denied.

Respectfully submitted,

ANDREW T, KARRON

Counsel of Record

DAVID P. GERSCH

GRAHAM J. JENKINS

ARNOLD & PORTERLLP -

555 Twelfth Street, N.W.

Washington, D.C. 20004-1206

(202) 942-5000

Counsel for Respondent

August 25, 2006 Pichin Corporation

APPENDIX

29 U.S.C. § 1369

Treatment of transactions to evade liability; effect of cor-

porate reorganization.

(a) Treatment of transactions to evade liability

If a principal purpose of any person in entering into any

transaction is to evade liability to which such person would

be subject under this subtitle and the transaction becomes

effective within five years before the termination date of the

termination on which such liability would be based, then such

person and the members of such person’s controlled group

(determined as of the termination date) shall be subject to

liability under this subtitle in connection with such termi-

nation as if such person were a contributing sponsor of the

terminated plan as of the termination date. This. subsection

shall not cause any person to be liable under this subtitle in

connection with such plan termination for any increases or

improvements in the benefits provided under the plan which

are adopted after the date on which the transaction referred to

in the preceding sentence becomes effective.

(b) Effect of corporate reorganization

For purposes of this subtitle, the following rules apply in the

case of certain corporate reorganizations:

(1) Change of identity, form, etc.

If a person ceases to exist by reason of a reorganization which

involves a mere change in identity, form, or place of

organization, however effected, a successor corporation re-

sulting from such reorganization shall be treated as the person

to whom this subtitle applies.

(2) Liquidation into parent corporation

If a person ceases to exist by reason of liquidation into a

parent corporation, the parent corporation shall be treated as

the person to whom this subtitle applies.

(3) Merger, consolidation, or division

If a person ceases to exist by reason of a merger, consoli-

dation, or division, the successor corporation or corporations

shall be treated as the person to whom this subtitle applies.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.