Petition for Writ of Certiorari — Air Line Pilots Ass'n, International v. Pension Benefit Guaranty Corp., 127 S. Ct. 1910 (2007) (No. 06-1019)

061019 JAN 23 200

N

ate

— wee EPIC EOF Tie CLERK

IN THE

Supreme Court of the United States

AIR LINE PILOTS ASSOCIATION, INTERNATIONAL

Petitioner.

V.

PENSION BENEFIT GUARANTY CORPORATION AND

UNITED AIR LINES. INC.

Respondents.

On Petition for a Writ of Certiorari to the

United States Court of Appeals

for the Seventh Circuit

PETITION FOR A WRIT OF CERTIORARI

MICHAEL E. ABRAM *

BABETTE A. CECCOTTI

THOMAS N. CIANTRA

ZACHARY N. LEEDS

CLAIRE K. TUCK

COHEN. WEISS AND SIMON LLP

330 West 42nd Street

New York. NY 10036

(212) 563-4100

Attorneys for Petitioner Air Lin

* Counsel of Record Pilots Association, International

W LSON-EPES PRINTING CO INC. — (202) 789-0096 - WasHinGron D C 20002

@ > «0

QUESTIONS PRESENTED FOR REVIEW

1. Where Congress directed that a court, not the Pension

Benefit Guaranty Corporation (the “PBGC’”) establish the

termination date of a pension plan, which the PBGC sccks to

involuntarily terminate under 29 U.S.C. § 1342(c), whether

the court below ignored the plain meaning of the involuntary

termination provisions by (a) determining the unreasonable

increase in the PBGC’s liability and (b) failing to inde-

pendently establish a termination date.

2. Whether a bankruptcy court order conclusively decid-

ing that a debtor must continue contractually required pay-

ments constituted a final order for which an appeal not timely

taken was forfeited.

(1)

il

LIST OF PARTIES TO THE PROCEEDING

The Air Line Pilots Asscciation, International (“ALPA”) is

an unincorporated labor organization representing pilots in

the commercial airline industry. It was an intervenor-

defendant in PBGC v. United Air Lines, Inc., Adv. Proc. No.

05-481 (Bankr. N. D. Ill.) (the “Pension Plan Termination

Case”), an appellant and cross-appellee in the court of ap-

peals, and a petitioner in this Court; ALPA was also the

movant in the separate contested proceedings in the bank-

ruptcy court regarding the payment of October, 2005 supple-

mental pension benefits (the “Supplemental Benefits Case”),

and, with respect to that case, was an appellec in the dis-

trict court and the court of appeals, and is the petitioner in

this Court.

The United Retired Pilots Benefit Protection Association

(“URPBPA”) is an Illinois not-for-profit corporation repre-

senting certain retired pilots of United Air Lines, Inc. The

individual parties are retired United pilots who serve on

URPBPA’s Board of Directors. URPBPA was also an

intervenor-defendant, appellant and cross-appellee in the

Pension Plan Termination Case, and a movant and appellee in

the Supplemental Benefits Case. URPBPA is the petitioner in

a separate petition for a writ of certiorari regarding the Pen-

sion Plan Termination Case and the Supplemental Benefits

Case.

The PBGC is a wholly-owned United States government

corporation established under 29 U.S.C. § 1302(a) to admin-

ister the defined benefit pension plan insurance program

established by Title TV of the Employee Retirement Income

Security Act, 29 U.S.C. § 1001 ef seg. (“ERISA”). The

PBGC was the plaintiff in the Pension Plan Termination

Case, the appellee and cross-appellant in the court of appeals,

and is a respondent in this Court.

iil

United Air Lines, Inc. and twenty-seven related and

affiliated entitics as debtors and debtors in possession” were

respondents in the Supplemental Benefits Case in the

bankruptcy court and appellants in the district court.

Reorganized United Air Lines, Inc. was appellant in the court

of appeals and is a respondent in this Court. United Air

Lines, Inc., as administrator of the United Air Lines Pilots

Defined Benefit Pension Plan (the “Pilot Plan”), was a

defendant in the Pension Plan Termination Case, an appellee

in the court of appeals, and is the respondent in this Court.

The foregoing entities, as debtor, as the reorganized entity,

and as administrator of the Pilot Plan, are hereinafter referred

to collectively as “United.”

” The debtor entitites were: UAL Corporation, UAL Loyalty Services,

LLC, Ameniti Travel Clubs, Inc., Mileage Plus Holdings, Inc., Mileage

Plus Marketing, Inc., MyPoints.com, Inc., MyPoints Offline Services,

Inc., Cybergold, Inc., iTarget.com, UAL Company Services, Inc., UAL

Benefits Management, Inc., United BizJet Holdings, Inc., BizJet Charter,

Inc., BizJet Fractional, Inc., BizJet Services, Inc., United Airlines, Inc.,

Kion Leasing, Inc., Premier Meeting and Travel Services, Inc., United

Aviation Fuels Corporation, United Cogen, Inc., Mileage Plus, Inc.,

United GHS, Inc., United Worldwide Corporation, United Vacations, Inc.

UAL Corporation is the publicly traded parent company for United Air

Lines, Inc.

TABLE OF CONTENTS

QUESTIONS PRESENTED FOR REVIEW.................

LIST OF PARTIES TO THE PROCEEDING ...............

BPS A FF LFA Bes estsicrsncscpunicaainnscsnoncensepeinse

Ce RI casicchsvercocavacibipicosscayeniviviivscunineniobedes

ETRE RET CAE LOE CA sccssceseciccccssesinsissnpsinvescis

ee SESE ED Die TET ae SENS ATCT DE AO TOT TURE TS

Factual and Procedural History ...............:sssseseseseeeeees

REASONS FOR GRANTING THE WRIT ..................

I.

II.

The Decision of the Court of Appeals That the

Pilot Plan Should Be Terminated as of

December 30, 2004 Misapplies the Involun-

tary Pension Plan Termination Provisions and

Requires Review to Clarify an Important

CUREEION OF FOGCTAL TW oi iicccccecececescersevecencecscnass

A. The Meaning of an “Unreasonable”

ids iacsétiesttajestacsdiataldeciascadsaniaaa i

B. Participants’ Expectations in Continued

PID oi iitistinibsczstiincteeke Scie

The Decision of the Court of Appeals That

United Had Not Forfeited Its Appeal Rights In

Challenging Its Obligation to Pay Supple-

mental Benefits Deepens an Already Con-

fusing Divide in Case Law Regarding Appeals

in Bankruptcy Cases and Presents an Issue of

Compelling Importance Warranting This

RE BIO ansniiiccsottn'edecpescunsandesipiranaastiatostees

12

13

16

19

vi

TABLE OF CONTENTS—Continued

A. The Ruling Below was Contrary to Well-

Estadltaned Precedent ......0ssscsesscesessessoresersee

B. The Court’s Approach Introduces New

Uncertainty into the Administration of

APPENDICES

Opinion Below

A. Opinion, Seventh Circuit Court of Appeals,

Case Nos. 06-1867, 06-2662, 06-2714 & 06-

ee NE Big HAD Cerctian wsotcestetoiisasstaniores

Relevant Lower Court Rulings

Pension Plan Termination Case

B.

Order, Honorable Joan H. Lefkow, United

States District Court, Northern District of

Illinois, Case No. 06-C-1222, June 13, 2006...

Memorandum Opinion and Order, Joan H.

Lefkow, United States District Court,

Northern District of Illinois, Case No. 06-C-

Re NE Be MD cc ctccerscissicudndilsneanttnaniacaeeanieiss

Proposed Findings of Fact and Conclusions

of Law on Motion for Summary Judgment

and Following Trial, Honorable Eugene R.

Wedoff, United States Bankruptcy Court,

Northern District of Illinois, Case No. 02-B-

48191, 0S-AP-481, February 13, 2006............

. Order, Honorable John W. Darrah, United

States Distnct Court, Northem District of

Illinois, Case No. 05-C-6955, February 2, 2006..

Page

19

23

26

la

18a

19a

46a

76a

Vil

TABLE OF CONTENTS—cContinued

. Memorandum Opinion and Order, Honorable

John W. Darrah, United States District Court,

Northern District of Illinois, Case No. 05-C-

GSD) TOROUEY 2, FOO cicisicsincssevncsevininevinienintss

. Order, Honorable Eugene R. Wedoff, United

States Bankruptcy Court, Northern District of

Illinois, Case No. 02-B-48191, 05-AP-481,

CIE FR FO biciisiniinchipnstdivoicctaindacavertienmut

. Memorandum of Decision, Honorable Eugene

R. Wedoff, United States Bankruptcy Court,

Northern District of Illinois, Case No. 02-B-

48191, 0S-AP-481, October 26, 2005...............

Amended Memorandum of Decision on

Motion for Summary Judgment, Honorable

Eugene R. Wedoff, United States Bankruptcy

Court, Northern District of Illinois, Case No.

02-B-48191, 05-AP-481, October 26, 2005 ....

Excerpts from Transcript of September 21,

2005 Proceedings before Honorable Eugene

R. Wedoff, United States Bankruptcy Court,

Northern District of Illinois, Case No. 02-B-

a EE acon ciwiicinasceebsotindanies

Supplemental Benefits Case

K. Order, Honorable John W. Darrah, United

States District Court, Northern District of

Illinois, Case No. 05-C-6220, February 23,

SAIN R dere cl N ON eT N OLA: RDN DT ches AS

Page

T7a

88a

90a

100a

118a

Vili

* _“*LE OF CONTENTS—Continued

L. Order, Honorable Eugene R. Wedoff, United

States Bankruptcy Court, Northern District of

Illinois, Case No. 02-B-48191, October 6,

2005 and Excerpts from Transcript of

October 6, 2005 Proceedings before

Honorable Eugene R. Wedoff, United States

Bankruptcy Court, Northern District of

SONS Gi EF Lvkises case cavsnctevieasancivessisetececes

Other Rulings

M. Order, Honorable Eugene R. Wedoff, United

States Bankruptcy Court, Northern District of

Illinois, Case No. 02-B-48191, February 18,

BNO ackiicsci ucts butcacrsttunvecsumcaducitndabiane alleles

N. Excerpts from Transcript of February 18,

2005 Proceedings before Honorable Eugene

R. Wedoff, United States Bankruptcy Court,

Northern District of Illinois, 02-B-48191........

Order on Petition for Rehearing

O. Order Denying Petition for Rehearing, Sev-

enth Circuit Court of Appeals, Case Nos. 06-

1867, 06-2662, 06-2714 & 06-2843, Novem-

WE FD 5. TIP ciernsticcccuhiccinidianssnaiciiecamliaies

Statutes Involved

Bs. ae lice UID pthiicccteipeaaicaianaaeie

CO. FEEL. © A cictrdinnicbicciee eee

es Fr es BB apiece ect ces

Additional Material

S. ALPA News Release No. 04-UAL6, Decem-

ber 30, 2004 (ALPA Trial Exhibit 27) ............

Page

122a

I3la

133a

iX

TABLE OF AUTHORITIES

CASES Page

Ass'n of Flight Attendants v. PBGC,

No. 05-1036, 2006 WL 89829 (D.D.C. Jan. 13,

re a acsauskesdecnsesgsins 7

Bank of Am., N.A., v. Moglia,

EE Fe RE CEU GAL, BUD) cccoccceccessesecvsssvoveeses 20

Budinich v. Becton Dickinson and Co.,

I SIT os scscreucccedbeuibsbevesevoessenveses 22

Conn. Nat’l Bank v. Germain,

I ES BED ns cvcesninnsieuavesssvineverestescorénes 13

Doggett v. United States,

I MET SWINE scccsnesveciscarsevecvausonersecoverevéens 14

Howard Delivery Serv., Inc. v. Zurich Am. Ins.

Co.,

Ne OID vo cisck veacsevencasevcerntenscseseveres 20

In re Christian,

SOG F260 46 (3G Cir. 19G6) ........0.0.....cccccscesevevess 23

In re Fowler,

394 F.3d 1208 (9th Cir. 2005) ..................ccccceees 22

In re Fox,

241 B.R. 224 (10th Cir. B.A.P. 1999) ..000..... 21

In re Golant,

BO SE CTU GET. ZOOL) .ncccessncsscceccsesseescoes 21

In re Gould,

977 F.2d 1038 (7th Cir. 1992)........ siteairaneinlig 23, 24

In re Greene County Hosp.,

ee eae Se COU COT. BDGB) on. ccvecccresoveseceesvenses 21

In re Huebner,

Ue F 2 1222 (OU CHP. EDDD) ..<..ccccckcscecesscccecess

N

n

x

TABLE OF AUTHORITIES—Continued

Page

In re Integrated Res. Inc.,

FE Sr Rs FD iivcteicstssbesdinbeeaaniiecoiiiba 20

In re James Wilson Assoc.,

er Fae Re CT Gi EGE ccvesncctvieresiisicninincviiitn ee

In re Kids Creek Partners, L.P.,

200 F.3d 1070 (7th Cir. 2000)..........ccccccccocssccsess 22

In re Martin Bros. Toolmakers, Inc.,

796 F.2d 1435 (Lith Cir. 1986) 0.0.0.0... ceseee 23, 24

In re Miller,

284 B.R. 734 (10th Cir. B.A.P. 2002) ............... 22

In re Saco Local Dev. Corp.,

seb wT gi) 4s a) 3 | Renee eemmannr 20

In re Taylor,

PES Fe LOZ EAE CI. TOGO iivccniniscicccetinccient 20-21

In re UAL Corp.,

SET F.3d GES Cis Cie, DOS) wicciccveccenivcvedettneicces 22

In re UAL Corp., Appeal of Ass'n of Flight

Attendants, Sis

428 F.3d 677 (7th Cir. 2005) 0.0.0... eeceeeeeeeeeees 5 Oe

In re Urban Broadcasting Corp.,

401 F.3d 236 (4th Cir. 2005) ..................ccssscessees 21

Jones v. Flowers,

Ee ae ee Cites taehidconcacenbasbnacaibiemanter 18

Khan & Nate's Shoes No. 2, Inc. v. First Bank of

Whiting,

908 F.2d 1351 (7th Cir. 1990) 0.0.0.0... 25

PBGC v. Dickens,

535 F.Supp. 922 (W.D. Mich. 1982)................. 17

xi

TABLE OF AUTHORITIES—Continued

Page

PBGC v. FEL Corp.,

798 F Supp. 239 (D.N.J, 1992).......-csccrceossoereees 15

PBGC v. Heppenstall Co.,

SD Fe CO eo Cl A, EPO cicentssiinsccotncanicencinsin 12, 16

PBGC v. LTV Corp.,

FF TOE hcriniicintnctdniasiciatbenrsdeincdanin 14

PBGC v. Mad. Glass Corp., ma

618 F.Supp. 1410 (D. Md. 1985)... eee 16

~ PBGC v. Mize Co., Inc.,

987 F.2d 1059 (4th Cir. 1993) .........cccccccsccercorees 17

PBGC v. Republic Technologies Int'l, LLC, ie

386 F.3d 659 (Gth Cir. 2004) ........cecccscsoseecsooevess 16

PBGC v. The Pension Comm. of Pan Am. World

Airways, Inc.,

777 F.Supp. 1179 (S.D.N.Y. 1991) vecceeessseesseees 15,17

PBGC v. United Airlines Inc.,

No. 05-2375, 2007 WL $7271 (4th Cir. Jan. 9.

f 2 5 RICA eC NC RES DRM AORTA RE RENE Area, EO ET f

Pavelic & LeFlore v. Marvel Entertainment

Group,

as Se CSOD istic cervininbvanstsovcinpiniiecchibenss 13

Price v. City of Fort Wavne,

BEF Fe Pe CPU BED viisiciccctisonsnpaspensene 18

Rodriguez v. United States,

i ee TB chitin rccuivob teclisineccnesuekinereoaons 14

Samson v. California,

Fe A ee visas chcdicieinccccdcsicccdbinmsessctseins 15

XIl

TABLE OF AUTHORITIES—Continued

Page

Schering Corp. v. Ill. Antibiotics Co.,

OF FIO DOT CFOS GAL, FOOD iccssscenvevecsicsenenscinccess 23

Taylor v. Voss,

BEE ee NTO LTE sthiidshcknitrthicdinssieipuecitioas 20

United States v. Clark,

OS BR BF CED triste picesaiciriusininiacnnsssbicidiaincee 19

Walker v. City of Hutchinson,

FE AI le FR iosivinoins sb incbuiinissisvaasclacdnbodes 18

STATUTES, REGULATION AND RULE

Re 3 MAM © 5 5. SRASUIARI Mag sot B CURRY PT SEC EDIE ONO USIER 3

Be ree Oe Rs ciscaicsasisseaivasciend earncuanibarneonns 3,6

PGE 1ST ass aisiandnausaseadobaneamusiins 18

er EE Geta ciccenshgsitncopddaatitininedeiantlaccehaic passim

Se Ri ls ee 8 hiicssickoniiatteisns cinta twidncotoiadcesse 2

ree PE Biicia tine ipacepadccncsinaseticeibbonsmane. ii

Be ace Re ics nscshceisessdcnegieaticidaoeiecaswhates 12

Be chs pparividbastitcr ticeciiasiaveapaooien 8, 14

Br ats RED casita paccrcesecnssescuetiveds 5

Br Ne BE Kast esd bigbiintbcaciniiiadniedaseuabeteoenio; passim

ae RT Fe iit pnsed okie adinaivientonteathyvihenbon passim

PCP E CAT A occas 8

OG. Te, TO, Pe FOG) svc sccisicinsiiecscsseptatinsatens 21

ERISA, Pub. L. No. 93-406, § 4042(c), 88 Stat.

829, 1021 (1974) (amended 1980) .......ceccseesee-. 13

Xill

TABLE OF AUTHORITIES—Continued

SECONDARY MATERIALS Page

Cr winitateccininciintininieteisianpinatebeen 20, 21

Black's Law Dictionary (8th ed. 2004) ................. 15

John P. Hennigan, Jr., Towards Regularizing

Appealability in Bankruptcy, 12 Bankr. Dev. J.

FE 1 eee tnspciccacnieasvotensedioneienpeldiiennaantineniave 20, 24, 25

IN THE

Supreme Court of the Anited States

Se!

AIR LINE PILOTS ASSOCIATION, INTERNATIONAL

Petitioner,

vi

PENSION BENEFIT GUARANTY CORPORATION AND

UNITED AIR LINES, INC.

Respondents.

On Petition for a Writ of Certiorari to the

United States Court of Appeals

for the Seventh Circuit

PETITION FOR A WRIT OF CERTIORARI

The Air Line Pilots Association, International petitions this

Court to issue a writ of certiorari to the United States Court of

Appeals for the Seventh Circuit to review the judgment in /n

re UAL Corporation (Pilots’ Pension Plan Termination), 468

F.3d 444 (7th Cir. 2006).

OPINIONS BELOW

The opinion of the United States Court of Appeals for the

Seventh Circuit is reported at /n re UAL Corp., 468 F.3d 444

(7th Cir. 2006). App. A, la-17a. The November 13, 2006

order of the court of appeals denying ALPA’s petition for

rehearing is unreported. App. O, 137a.

The court of appeals’ opinion consolidated the appeals of

separate cases, the “Pension Plan Termination Case” and the

“Supplemental Benefits Case.” The decision of the court of

2

appeals in the Pension Plan Termination Case affirmed a June

13, 2006 decision and order of the Honorable Joan H. Lefkow

of the United States District Court for the Northern District of

Illinois, reported at PBGC v. United Air Lines, Inc., 436

F.Supp.2d 909 (N.D. Ill. 2006) (the “Pension Plan Termi-

nation Order’). App. B, 18a, App. C, 19a-45a. Judge

Lefkow’s decision adopted, as modified, the unreported

Proposed Findings of Fact and Conclusions of Law issued by

the Honorable Eugene R. Wedoff of the United States

Bankruptcy Court for the Northern District of Illinois. App.

D, 46a-75a. The bankruptcy court initially issued the

proposed findings and conclusions on October 26, 2005 as an

Amended Memorandum of Decision on Motion for Summary

Judgment, reported at Jn re UAL Corp., 333 B.R. 802 (Bankr.

N.D. Ill. 2005), App. I, 100a-117a, and separate Memo-

randum of Decision, reported at 332 B.R. 858 (Bankr. N.D.

Ill. 2005), App. H, 90a-99a. On February 2, 2006, the

Honorable John W. Darrah of the United States District Court

for the Northern District of Illinois reversed and remanded

these rulings to be reissued as the proposed findings and

conclusions. The February 2, 2006 Memorandum Opinion

and Order are unreported. App. E, 76a, App. F, 77a-87a.

The court of appeals’ Supplemental Benefits Case decision

reversed the unreported order entered on February 23, 2006

by Judge Darrah. App. K, I2la. Judge Darrah’s order

dismissed as unripe the appeal of an unreported October 6,

2005 order entered by the bankruptcy court (the “Sup-

plemental Benefits Order”). App. L, 122a-130a.

JURISDICTION

The Court of Appeals for the Seventh Circuit entered

judgment in this case on October 25, 2006. A timely petition

for rehearing was filed with that court, and was denied on

November 13, 2006. This Court’s jurisdiction is invoked

pursuant to 28 U.S.C. § 1254(1).

3

STATUTES INVOLVED

The following statutory provisions, which are set out in full

in the accompanying appendix, are relevant to this case: 28

U.S.C. § 158, 29 U.S.C. § 1342, and 29 U.S.C. § 1348.

STATEMENT OF THE CASE

Introduction

United filed a petition for reorganization under Chapter 11

of the federal bankruptcy law, 11 U.S.C. §§ 101-1532, in

December, 2002 and cmerged from bankruptcy on February

1, 2006. While in bankruptcy, United pursued a restructuring

of its labor and pension costs, including two rounds of

proceedings to reject its collective bargaining agreements

with ALPA under 11 U.S.C. § 1113 that led to modified

collective bargaining agreements. App. C, 20a-2la. United

also initiated separate, related proceedings designed to

climinate its defined benefit pension funding obligations and

it ultimately reached a comprehensive settlement with the

PBGC for termination of all four of its defined benefit

pension plans covering pilots and other classifications of

cmployees. See In re UAL Corp., Appeal of Ass'n of Flight

Attendants, 428 F.3d 677, 681 (7th Cir. 2005).

This petition concerns two separate, but related proceed-

ings in the United bankruptcy case, the termination of the

Pilot Plan through an action commenced by the PBGC under

Title I[V of ERISA, and United’s efforts to cease the payment

of contractually owed supplemental retirement benefits that

are paid from United’s general assets (rather than from the

Pilot Plan’s assets). '

' Hereinafter, the “Pilot Plan” refers to the defined benefit pension plan

qualified as a retirement plan under 26 U.S.C. § 401(a) and subject to the

PBGC’s termination authority under Title 1V of ERISA. “Supplemental

Benefits” refers to the monthly retirement payments that were made from

United’s general assets.

4

In the Pension Plan Termination Case, an action contested

by ALPA and by URPBPA, the PBGC sought to terminate

the Pilot Plan under 29 U.S.C. § 1342(c) in the midst of

United’s attempt to reject its collective bargaining agreements

with its labor unions to eliminate its pension funding

obligations. The PBGC sought to terminate the plan by

showing “that the plan must be terminated in order... to

avoid... any unreasonable increase in the liability of the

[PBGC insurance] fund,” 29 U.S.C. § 1342(c), with a date of

plan termination of December 30, 2004, established under 29

U.S.C. § 1348(a)(4). The courts below granted the relief

requested by the PBGC despite the fact that United and the

PBGC had already reached a settlement agreement whereby

the PBGC was well-compensated for agreeing to accept the

liabilities of all of United’s defined benefit pension plans,

including the Pilot Plan. Moreover, the courts chose the

December 30, 2004 termination date by applying strikingly

dissimilar case law involving severely distressed plan

sponsors. The Pilot Plan was terminated as of the day after

the PBGC filed its involuntary termination complaint. With

no warning, pilots who continued to provide services to

United under their modified concessionary labor agreements

would no longer earn pension accruals even for the few addi-

tional months they expected their peiision plan to continue.

In the Supplemental Benefits Case, in the Fall of 2005,

after the bankruptcy court issued a ruling (later vacated by

Judge Darrah) terminating the Pilot Plan, United, for the

second time in the bankruptcy casc, attempted to discontinue

the payment of the Supplemental Benefits. The bankruptcy

court ruled against United because the court had already ruled

(when United first sought to discontinue payment of the

Supplemental Bencfits) that United was required to pay the

benefits “until the Pilot Plan is terminated pursuant to

applicable law or the parties agree otherwise,” an order

United had not appealed and to which it was therefore bound.

Despite that earlier unappealed ruling, the court of appeals

5

ruled that United could again press its objection to contin-

uation of the payments because United was not required to

appeal what the Court deemed an interlocutory ruling. In

reaching its decision, the court ignored that United could have

appealed the initial order as of right and instead relied on

wholly inapposite, non-bankruptcy law concerning inter-

locutory orders in other cases.

Factual and Procedural History

On December 29, 2004, the PBGC filed suit to terminate

the Pilot Plan under 29 U.S.C. § 1342(c), seeking a termi-

nation date of December 30, 2004. The termination case was

referred to the bankruptcy court and in July, 2005, the PBGC

moved for summary judgment. In August, the bankruptcy

court issued a preliminary oral ruling that the PBGC was

entitled to summary judgment regarding the proposed date of

plan termination, but was required to prove at trial that the

termination of the Pilot Plan was necessary under § 1342(c)

in order to avoid an unreasonable increase in the liability of

the PBGC insurance fund. The district and appeals courts

subsequently affirmed this ruling. App. C, 19a-45a, App.

A, la-17a.

At the time the PBGC brought its action to terminate the

Pilot Plan, United’s pilots were voting on the terms of a new

collective bargaining agreement that resolved United’s

second motion to reject its agreement with ALPA. See App.

C, 20a-21a. The agreement eventually ratified by the pilots

(the “ALPA Agreement’), included an 11.8 percent pilot pay

cut (adding to a substantial pay cut taken a few months after

United entered bankruptcy) and various work rule changes.

In addition, ALPA agreed to waive “any claim it may have

that termination of the [Pilot] Plan would violate the terms

and conditions of the existing collective bargaining agree-

ment” and agreed to “not otherwise oppose the Company’s

efforts to terminate” the Pilot Plan under the ERISA distress

termination provision, 29 U.S.C. § 1341(c)(2)(B)ai). 7d.

6

Under the agreement, United agrced that it would not seek to

terminate, or agree to the termination of, the Pilot Plan,

effective at any time before the latest effective date of the

termination of any other United pension plan, a date which

turned out to be June 30, 2005. The agreement provided that

it was not to be construed “as any agreement of any form by

[ALPA] that the [Pilot] Plan should be terminated.” The

agreement also provided that the Pilot Plan “shall remain in

full force and effect unless... the Bankruptcy Court issues

an order declaring that the Company has met the require-

ments for plan termination under” ERISA. /d.

From the time United filed for bankruptcy, pilots continued

to receive retirement benefits. The benefits came from two

sources. The benefits below the limits permitted by § 401(a)

of the Internal Revenue Code for tax-qualified pension plans

were paid out of the Pilot Plan pension fund trust. The

payments that exceeded the § 401(a) limits, the Supplemental

Benefits, were paid by United directly from its general

corporate asscts.

After reaching the ALPA Agreement, United sought in

February 2005 to stop paying the Supplemental Benefits. In

response, ALPA brought a motion to compel United to

continue to make the payments, on the ground that the

agreement contractually obligated United to do so. App. N,

134a. The bankruptcy court held that the contract required

United to continue paying the Supplemental Benefits until the

Pilot Plan terminated under applicable law. /d. at 136a. The

bankruptcy court rejected United’s argument that a possible

future ruling in the Pension Plan Termination Case estab-

lishing December 30, 2004 as the Pilot Plan termination date

would alter United’s current contractual obligation to make

the payments. /d. In reaching this conclusion, the bank-

ruptcy court noted that the PBGC sought the retroactive plan

termination date to define its rights with regard to qualified

pension benefits only (meaning those benefits paid from the

7

Pilot Plan trust then subject to the PBGC’s termination

lawsuit). App. N, 134a. The bankruptcy court ordered that

United “shall continue payment of non-qualified [Supple-

mental] benefits (as described in the motion) until the [Pilot

Plan] is terminated pursuant to applicable law or the parties

agree otherwise.” App. M, 13la.“ United did not appeal the

February 18, 2005 order.

In April, 2005, while its termination lawsuit over the Pilot

Plan was pending, the PBGC reached agreement with United

(the “PBGC Settlement”) whereby the PBGC agreed to the

termination of all of United’s defined benefit pension plans.

See Ass'n of Flight Attendants, 428 F.3d at 681. As a result

of the PBGC settlement, a plan covering United ground

personnel was terminated effective March 11, 2005. See

PBGC v. United Airlines Inc., No. 05-2375, 2007 WL 57271,

at *9 (4th Cir. Jan. 9, 2007). Two other plans were termi-

nated with effective dates of June 30, 2005. See Ass'n of

Flight Attendants v. PBGC, No. 05-1036, 2006 WL 89829, at

*11 (D.D.C. Jan. 13, 2006). The Pension Plan Termination

Case continued to be litigated, because the PBGC reserved its

right to seek a December 30, 2004 termination date for the

Pilot Plan, but with a limited range of possible dates as a

result of the PBGC Settlement. The Court of Appeals for the

Seventh Circuit ultimately approved the settlement. Ass'n of

Flight Attendants, 428 F.3d 677.

At trial in the Pension Plan Termination Case in Septem-

ber, 2005, ALPA moved to introduce additional evidence

concerning the termination date to establish that Pilot Plan

participants had a continued expectation that the plan would

* The bankruptcy court reasoned that under United's “carefully bar-

gained-for” post-pctition agreement with ALPA, “United committed to

continue making the payments” until termination of the plan. App. N,

136a. The court stated that “until that termination actually occurs.

irrespective of any retroactive effective date, the obligation to make

payment of nonqualified benefits is present under the CBA.” /d. at 135a.

8

continue given ALPA’s position opposing a termination date

of December 30, 2004. The court denied the motion. App.

J, 119a-120a.

In its case, the PBGC identified four factors that would

increase its liability if the plan was not terminated on

December 30, 2004, but continued for six months until June,

30, 2005, the latest termination date contemplated under the

PBGC Settlement. Specifically, the PBGC pointed to the

effect of the statutory annual cost of living adjustment,

effective January |, 2005, in the maximum benefit that the

PBGC is required by law to guarantee, established under

ERISA to track changes in the Social Security wage base

(the “COLA”). See 29 C.F.R. § 4011 Appendix B (Table

of Maximum Guaranteed Benefits); see also 29 U.S.C.

§ 1322(b). The remaining factors were attributable to

monthly service accruals and benefit payouts that would

occur in the normal operation of the plan and other gradual

changes the PBGC alleged should be counted as an unrca-

sonable increased liability. ALPA contested the PBGC’s

claim that the additional liability attributable to this period

constituted an “unreasonable increase” in the PBGC’s

liability. See App. C, 41a-42a.

On October 26, 2005, the bankruptcy court issued a ruling

granting all of the relief sought by the PBGC. App. G, 88a.

The court set the additional liability attributable to the period

December 30, 2004 through June 30, 2005 at $84.2 million

(less than the PBGC’s calculation) and ordered the Pilot Plan

terminated as of December 30, 2004. App. H, 94a.

Because the bankruptcy court’s order was issued in a “non-

core” proceeding, see 28 U.S.C. § 158(c)(1), it was not final

under the statutory procedures for a review of non-core

matters, and ALPA, URPBPA and the PBGC lodged

objections. On June 13, 2006, the district court adopted the

bankruptcy court’s proposed findings and conclusions, as

modified, and entered a final order terminating the Pilot Plan

9

effective December 30, 2004. App. B, 18a, App. C, 20a. The

district court did not grant ALPA’s request to accept

additional evidence regarding the notice of the PBGC’s intent

to terminate the plan and the expectations of the pilots.

In the interim, scizing on an earlier tentative ruling

announced by the bankruptcy court in the Pension Plan

Termination case, United decided, again, to cease paying the

Supplemental Benefits. ALPA, (joined by URPBPA) again

filed a motion to compel payment and the bankruptcy court

again granted the motion. App. L, 130a. The bankruptcy

court noted that it was following its prior order, which United

had not appealed. United did appeal this second ruling. On

February 23, 2006, the district court issued a minute order,

dismissing, “for lack of ripeness,” United’s appeal. App. K,

12la. United appealed that decision to the court of appeals.

In addition, ALPA and URPBPA appealed the district court’s

order in the Pension Plan Termination Case.”

In a consolidated ruling on those appeals, the court of

appeals affirmed the ruling in the Pension Plan Termination

Case and reversed the order in the Supplemental Benefits

Case. In reviewing the pension termination, the court

concluded that the additional costs to the PBGC for con-

tinuation of the Pilot Plan for the six-month period through

June 30, 2005 were “unreasonable,” dismissing ALPA’s

attempt to compare that cost with the “total obligations of the

plan (several billion dollars),” because any “number can be

made to look trifling by comparing it with some much larger

number.” App. A, 10a. Instead of identifying what relevant

comparators should be used to determine what loss would be

“unreasonable,” the court summarily concluded that by any

“normal calculation” $84 million is “substantial.” /d.

* Even though the PBGC prevailed in the termination action, the

agency filed a cross-appeal secking affirmation of the Pension Plan

Termination Order on other grounds.

10

The court did not address the merits of the December 30,

2004 termination date, noting only that “the district judge was

not required to split the difference between the ALPA and the

PBGC. That United had promised the Union not to agree to a

date before June 30 does not affect either the PBGC or the

court, for they are strangers to the bargain.” /d. at lla. The

PBGC’s cross-appeal was dismissed as an improper request

for an advisory opinion. /d. at Sa.

With respect to the Supplemental Benefits Order, the court

determined that United’s failure to appeal the initial February,

2005 decision compelling it to continue making payments did

not preclude it from appealing the Supplemental Benefits

Order because the earlier order was interlocutory, and failure

to appeal an interlocutory decision does not result in a

forfeiture of a litigation position. /d. at 12a-l4a. On the

merits, the court ruled that United was not required to pay the

Supplemental Benefits due for October, 2005 or thereafter

because the termination of the Pilot Plan, which was set

retroactively at December 30, 2004, necessarily terminated its

obligation to pay the Supplemental Benefits.

REASONS FOR GRANTING THE WRIT

The petition should be granted because the issues presented

raise important questions of fedcral law that have not been,

and should be, settled by this Court. In its ruling affirming

the Pension Plan Termination Order, the court of appeals

ignored the plain language of the involuntary termination

statute, under which Congress (a) limited the PBGC’s ability

to terminate a pension plan and, (b) in order to protect

participants where a termination is contested, placed ultimate

decision-making power in the hands of the court. Even

though the Pilot Plan, like other United pension plans, was

terminated during United’s bankruptcy case, in which the

airline sought sweeping changes to its labor agreements and

the elimination of its pension obligations, the additional

1]

accruals for the six-month period the Pilot Plan could have

remained in effect beyond December 30, 2004 were

significant to the pilots as stakeholders competing with other

United stakeholders, including the PBGC, for the limited

returns available in the deeply concessionary environment of

the United bankruptcy.

The courts below instead applied a loose standard that

ignored the meaning of the statute and that would allow the

PBGC to terminate a pension plan whenever it faces any

additional liability if the plan continues, and as of a date that

affords no meaningful notice to the plan participants. The

Supreme Court should grant the writ in order to secure a

workable standard that comports with the plain language of

the statute.

In addition, the petition should be granted because in its

ruling in the Supplementai Benefits Case, the court of appeals

has created unworkable uncertainty among the courts

regarding the finality of appeals in bankruptcy. In ruling that

United had not forfeited its right to appeal a prior order

compelling the payment of the Supplemental Benefits, the

court undermined courts’ and parties’ ability to conclusively

resolve discrete matters within a bankruptcy case that are

critical to an expeditious overall completion of the case. If

the court’s ruling ignoring the important distinction between

non-bankruptcy interim orders and orders entered in discrete

proceedings in a bankruptcy case goes unreviewed, the

prospects for orderly resolution of bankruptcy cases are

severely weakened. —

12

I. The Decision of the Court of Appeals That the

Pilot Plan Should Be Terminated as of December

30, 2004 Misapplies the Involuntary Pension Plan

Termination Provisions and Requires Review to

Clarify an Important Question of Federal Law

ERISA permits the PBGC to seck the termination of a

single-employer pension plan by filing an action and estab-

lishing that the plan must be terminated “in order to protect

the interests of the participants or to avoid an unreasonable

deterioration of the financial condition of the plan or any

unreasonable increase in the liability of the [PBGC’s

insurance] fund.” 29 U.S.C. § 1342(c). In such a contested

plan termination case, the court establishes the termination

date. See 29 U.S.C. § 1348(a)(4). Congress thus intended

that the courts adjudicate a plan termination by addressing

and balancing the interests of the plan participants, the plan

itself and the PBGC. See PBGC v. Heppenstall Co., 633 F.2d

293, 301 (3d Cir. 1980). The provisions of Title IV of

ERISA apply to approximately 28,800 single-employer plans

insured by the PBGC, covering over 34 million individ-

uals. See http://www.phgc.gov/media/key-resources-for-the-

press/content/page 1 3540.html (last visited on Jan, 20, 2007).

The construction of these statutory provisions therefore has

enormous consequences for millions of active and retired

employces and their representatives’ and presents an impor-

tant question of federal law that has not been, and should be,

settled by this Court.

Congress considered the role of the Court in plan termi-

nations to be a “substantial safeguard” of the rights of par-

ticipants and beneficiaries. See 29 U.S.C. § 1342(a) (noting

* See 29 U.S.C. § 1303(f(1) (a participant or beneficiary, adversely

affected by an action of the PBGC or an “employee organization

representing such a participant or beneficiary” may bring an action against

the PBGC for appropriate equitable relict in the appropriate court).

13

that the PBGC may prescribe a simplified termination pro-

cedure for smaller plans that must include “the requirement

for a court decree under subsection [1342](c)”); App. C, 31a

(explaining that “the judicial decree functions as a ‘sub-

stantial safeguard’ for the rights of parties other than PBGC

affected by plan termination”). In particular, Congress did

not intend plans to be terminated as of a particular date

merely because the date is selected by the PBGC, as is

evident both from the statutory mandate that “the court”

establish the termination date under 29 U.S.C. § 1348(a)(4),

as well as from the requirement that the PBGC obtain a

decree from the court adjudicating the termination. 29 U.S.C.

§ 1342(c).

A. The Meaning of an “Unreasonable” Increase

Congress’ intention that the court balance three factors in

adjudicating a termination is also evident in the choice of the

word “unreasonable” to limit the additional liability that

could form the basis of a termination. In 1980, Congress

amended § 1342(c) to reinforce its intention. As originally

enacted, § 1342(c) allowed the PBGC to terminate pension

plans to avoid “further” increases. ERISA, Pub. L. No. 93-

406, § 4042(c), 88 Stat. 829, 1021 (1974). Congress

amended the statute to change the word “further” to “unrca-

sonable.” As this Court has repeatedly explained, “a legis-

lature says in a statute what it means and means in a statute

what it says there.” Conn. Nat'l Bank v. Germain, 503 U.S.

249, 253-54 (1992); see also Pavelic & LeFlore v. Marvel

Entertainment Group, 493 U.S. 120, 126 (1989) (the courts’

“task is to apply the text, not to improve upon it’).

The courts below, however, failed to apply the plain

meaning of the statute. In construing the standard set forth in

29 U.S.C. § 1342(c), the courts were required to conclude that

continuation of the Pilot Plan beyond December 30, 2004

until June 30, 2005 unreasonably increased the liability to the

14

insurance fund.? “Unreasonable” denotes something out of

the ordinary. See, e.g., Doggett v. United States, 505 U.S.

647, 652 (1992) (contrasting “ordinary” and “unreasonable’’).

In secking to terminate the Pilot Plan as of December 30,

2004, the PBGC aimed to prove that liability increases for the

period January | through June 30, 2005, the latest termination

date under PBGC’s global settlement with United, were

“unreasonable” under the statute. It could only point to,

however, increases from normal plan operations and from a

Congressionally-mandated cost of living adjustment that took

effect January 1, 2005.

Thus, the additional liability attributable to a continuation

of the Pilot Plan beyond December 30, 2004 includes several

components reflecting costs attributable to the passage of

time between January | and June 30, 2005, such as normal

benefit accruals due to the continued services rendered by the

pilots, merely “further,” rather than “unreasonable” increases.

The increased liability also includes $44 million attributable

to an increase in the annual COLA adjustment to the

maximum government benefit, an increase in the maximum

benefit that the PBGC is required to guarantee under 29

U.S.C. § 1322(b). As such, it is a cost Congress provided for

as part of its complex delineation of the benefits that would

be guaranteed by the pension insurance program. “Deciding

what competing values will or will not be sacrificed to the

achievement of a particular objective is the very essence of

legislative choice....” PBGC v. LTV Corp., 496 U.S. 633,

646-47 (1990) (quoting Rodriguez v. United States, 480 U.S.

522, 526 (1987)). The COLA adjustment effective January |,

2005 cannot be an “unreasonable” increase in the PBGC’s

liability where Congress has established it as an integral

component of the insurance program.

* Where, as here, the PBGC seeks termination solely to avoid an

“unreasonable increase in the liability of the fund,” that determination 1s

tantamount to a determination of the termination date itself.

15

The courts below also construed the statutory standard of

“reasonableness” in a virtual vacuum, divorced from any

consideration of the relevant context in the case, in particular,

the PBGC’s settlement with United. Cf Samson v.

California, 126 S.Ct. 2193, 2197 (2006) (the Court examines

““the totality of the circumstances’ to determine whether a

search is reasonable”); Black’s Law Dictionary 1293 (8th ed.

2004) (defining “reasonable” as “[flair, proper, or moderate

under the circumstances” (emphasis added)).

The court of appeals ignored this context, App. A, 9a-10a,

and instead stated, without explanation, that the amount at

issue here “is substantial by any normal calculation.” Jd. at

10a. Whether substantial or not, the question before the court

was whether the increase was “unreasonable.” The court’s

standard provides an unworkable framework for the PBGC,

other courts, and pension plan participants or their rep-

resentatives facing termination of their pension plan.

No other court of appeals has applied § 1342(c) to a

contested involuntary termination case like this one.° If

Congress’ deliberate choice in crafting a termination standard

is to be given effect by the courts, an application of the

standard that comports with its plain meaning needs clear

definition. This Court therefore should grant the writ to

ensure that the plain language of the statute is given effect.

* Several district courts have applied § 1342(c), and cach one has also

offered loose and ineffectual standards. Nonetheless, even these courts

have rclicd on more definite contextual analysis than the Seventh Circuit

did here. See, e.g., PBGC v. The Pension Comm. of Pan Am. World

Airways, Inc., 777 F.Supp. 1179, 1183 (S.D.N.Y. 1991) (“[a] substantial

increase in such potential liability, with no certain prospect that such

potential liability can be recouped, should be regarded under this statute as

unreasonable”); PBGC v. FEL Corp., 798 F.Supp. 239, 242 (D.N.J. 1992)

(relying on evidence showing that termination was immediately necessary

to ensure the PBGC’s recovery, as well as because the sponsor was

“technically insolvent”).

16

B. Participants’ Expectations in Continued

Accruals

In addition, contrary to Congress’ directive that the court

“establish[]” the termination date where the parties do not

agree, see 29 U.S.C. § 1348(a)(4), the courts below merely

selected the date chosen by the PBGC. In cases like this one,

courts generally select a plan termination date by “balanc[ing]

the competing interests of the [PBGC] and the participants in

an appropriate termination date.” Heppenstall, 633 F.2d at

301. In Heppenstall, the court defined the employees’

interests as an expectation in the continued accrual of benefits

and concluded that participants enjoy a statutory right to the

protection of those interests in a termination proceeding,

including notice of such proceedings. /d. at 301-03. Fol-

lowing Heppenstall, courts have determined the date on

which participants have received notice sufficient to extin-

guish their reasonable expectation in continued accrual of

benefits. Once that date is determined, the court selects the

date thereafter that “serves the interests of PBGC.” PBGC v.

Republic Technologies Int’l, LLC, 386 F.3d 659, 666 (6th Cir.

2004).

Under this test, courts ostensibly balance competing inter-

ests. In actuality, however, in most cases, by the time the

PBGC has issued its notice of termination, any reasonable

expectation of continued accruals has long since vanished. In

such cases, there is in reality little need to undertake a balance

of competing interests. In R77, for instance, the PBGC

sought a termination date in response to the company’s failed

efforts to reorganize, while the company was in the process of

shutting down. /d. at 660-61. In Heppenstall, the plan

sponsor had already ceased all operations by the time the

PBGC moved to terminate the plan. /d. at 301. See also

PBGC vy. Md. Glass Corp., 618 F.Supp. 1410, 1415-16 (D.

Md. 1985) (PBGC chose to terminate the plan after plant

production was brought to a standstill, evidenced by the

17

shutdown of the plant furnace); PBGC v. Mize Co., Inc., 987

F.2d 1059, 1060 (4th Cir. 1993) (PBGC sought termination of

plan six years after company ceased operations). In PBGC v.

Dickens, 535 F.Supp. 922 (W.D. Mich. 1982), “the PBGC

orally agreed at trial... [that the date the employer] totally

ceased operations” was the appropriate date of termination.

Id. at 925.’

Thus, although courts have generally selected the date

PBGC filed its termination complaint as the date employees’

expectations were extinguished, e.g., Mize, 987 F.2d at 1060,

in fact, a plant shutdown, an asset sale or other event resulting

in loss of employment provides a necessary factual predicate

for the cessation of the plan participants’ expectation of

continued pension accruals. Under those circumstances,

morcover, the interest of the PBGC in establishing an early

termination date is more consistent with the reduced ex-

pectations of continued employment.

The use of the PBGC notice as reflected in these liqui-

dation cases does not work, however, where there is a

divergence between participants’ actual expectation regarding

continued employment and continued pension accruals, on

the one hand, and the PBGC’s view of its interests in

stemming its losses on the other. The United bankruptcy bore

no resemblance at all to a case involving a shutdown of

operations or sale of assets that would extinguish the em-

ployees’ expectation in continued employment and accrual of

benefits as of the date the PBGC took its preemptive action

against the Pilot Plan.

United, the second largest airline in the United States, was

reorganizing aS an ongoing enterprise. Its intense effort to

"In Pan Am, the court rejected the termination date proposed by the

PBGC even after it provided notice. It established a termination date one

weck later, as of when the court determined that participants had received

constructive notice. Pan Am., 777 F.Supp. at 1185.

18

obtain labor cost concessions, pension funding relief and

other cost restructuring during a period of industry-wide

distress did not convey the same evidentiary predicate as the

cases under which the standard was erected. The PBGC’s

notices appeared just as the pilots were voting to ratify a

modified labor agreement with United. Communications from

ALPA expressed the union’s strong, negative reaction to the

action taken by the PBGC, and conveyed ALPA’s resolve to

challenge it. App. S, 153a. Under these circumstances, the

mere issuance of notices by the PBGC could not suffice to

extinguish the pilots’ expectations of continued accruals as of

December 30, 2004.

In order to give effect to the competing interests involved,

courts must balance them under 29 U.S.C. § 1348(a)(4) in

establishing a termination date, a balancing test that is

essentially fact intensive. Whether notice is adequate is fun-

damentally an issue of fact that depends on the circumstances.

See, e.g., Jones v. Flowers, 126 S.Ct. 1708, 1714 (2006) (“we

have explained that the ‘notice required will vary with

circumstances and conditions’” (quoting Walker v. City of

Hutchinson, 352 U.S. 112, 115 (1956)); Price v. City of Fort

Wayne, 117 F.3d 1022, 1026 (7th Cir. 1997). Because the

circurnstances here demanded more than merely applying the

two-part test developed under § 1348(a)(4) as a matter of law,

ALPA sought, unsuccessfully, the right to submit evidence in

the bankruptcy court on the matter, App. J, 119a-120a, and

again as part of its objections to the bankruptcy court’s

proposed finding of fact under 28 U.S.C. § 157(c). The

courts below not only erred in denying ALPA the right to

submit evidence, but more fundamentally failed to apply the

statutory termination test as adopted by Congress.

The writ should be granted so that courts will apply these

rules regarding the determination of adequate notice of a plan

termination in the manner Congress intended.

19

Il. The Decision of the Court of Appeals That United

Had Not Forfeited Its Appeal Rights In Challeng-

ing Its Obligation to Pay Supplemental Benefits

Deepens an Already Confusing Divide in Case Law

Regarding Appeals in Bankruptcy Cases and Pre-

sents an Issue of Compelling Importance Warrant-

ing This Court’s Review

A. The Ruling Below was Contrary to Well-

Established Precedent

In February, 2005, the bankruptcy court ordered United to

pay the Supplemental Benefits until the Pilot Plan was ter-

minated under the provisions of Title I[V of ERISA. See App.

M, 131a-132a. United did not appeal that order but initially

complied, and then decided not to make the Supplemental

Benefits due in October, 2005, before the court terminated the

Pilot Plan.

In later ruling that United was not obligated to pay the

Supplemental Benefits, the court of appeals rejected the

appellees’ argument that United had forfeited its right to

contest the October payment by failing to appeal the

February, 2005 order. The court rejected the forfeiture

argument based solely on its conclusion, nowhere analyzed in

the decision, that an appeal from the bankruptcy court’s

February, 2005 order would have been interlocutory, citing,

among other rulings, this Court’s decision in United States v.

Clark, 445 U.S. 23, 25 n.2 (1980). See App. A, 12a-14a.

Neither Clark nor the court’s other citations, however,

involved bankruptcy. appeals. The court simply presumed

that the February, 2005 ruling was interlocutory and that if

United “was willing to... Iet the subject slide until October

[2005], that was its own loss (and the retirees’ gain); a legal

ruling declaring the legal position lost forever would Icad

prudent lawyers to file appeals early and often, pouring

molasses on the judicial process.” /d. at 13a-14a.

20

The court’s ruling, however, ignored long standing case

law, including court of appeals precedent, that discrete

disputes within a bankruptcy case are separate judicial units

and that orders resolving these disputes on the merits are final

orders for appeal purposes.*® See generally, In re Saco Local

Dev. Corp., 711 F.2d 441 (ist Cir. 1983) (Breyer, J.); 1

Collier on Bankruptcy (15th ed. rev.), 4 5.07[i][b] (noting

that “each adversary proceeding or contested matter is a

discrete unit [within the larger bankruptcy case] and that,

once that unit is defined, ordinary concepts of finality

apply”), John P. Hennigan, Jr., Towards Regularizing

Appealability in Bankruptcy, 12 Bankr. Dev. J. 583, 599-602

(1996) (hereafter “Hennigan”) (describing legislative history

of bankruptcy appeals provisions).

The test for determining a final order in a bankruptcy

proceeding is that the order “must completely resolve all

issues pertaining to the disputed claim, including issues as to

proper relief.” Jn re Integrated Res. Inc., 3 F.3d 49, 53 (2d |

Cir. 1993). See also Saco Local Dev. Corp., 711 F.2d at 444

(for an order to be immediately appealable as a final order it

“must finally dispose” of a discrete dispute within the

bankruptcy case).

Thus, a bankruptcy court order is final for purposes of

appeal when it resolves on the merits a discrete dispute within

the larger bankruptcy case. See Howard Delivery Serv., Inc.

v. Zurich Am. Ins. Co., 126 S.Ct. 2105, 2110 n.3 (2006); Bank

of Am., N.A., v. Moglia, 330 F.3d 942, 944 (7th Cir. 2003); In

* The district court has jurisdiction to hear appeals from “final judg-

ments, orders and decrees” of the bankruptcy court. 28 U.S.C.

§ 158(a)(1).

” Historically, the bankruptcy laws have recognized a “proceeding” in a

bankruptcy as an “individual ‘matter [| of an administrative character. . .

presented in the ordinary course of the administration of the bankrupt’s

estate’” (alterations in original) (emphasis in original). Saco Local Dev.,

711 F.2d at 444-45 (citing Taylor v. Voss, 271 U.S. 176, 181 (1926)).

21

re Taylor, 913 F.2d 102, 104 (3d Cir. 1990) (order “fully and

finally resolved a discrete set of issues” and was therefore

appealable). See also In re Urban Broadcasting Corp., 401

F.3d 236, 247 (4th Cir. 2005) (order not final where it did not

conclusively determine a separable dispute); Jn re Golant,

239 F.3d 931, 934 (7th Cir. 2001) (in _ bank-

ruptcy proceedings, “[w|here an order terminates a discrete

dispute that, but for the bankruptcy would be a stand-alone

suit .. . the order will be considered final and appealable”’); Jn

re James Wilson Assoc., 965 F.2d 160, 166 (7th Cir. 1992); In

re Greene County Hosp., 835 F.2d 589, 594 (Sth Cir. 1988)

(for appeal purposes, final order includes “an order that

conclusively determines a separable dispute’’); /n re Fox, 241

B.R. 224, 228 (10th Cir. B.A.P. 1999) (order not appealable

as a final order unless it “conclusively determines ‘discrete

disputes’ within the larger case”).

By contrast, an interlocutory order in bankruptcy, which is

immediately appealable only if certain conditions are met, see

28 U.S.C. § 158(a)(2), (3), is cither one which does not reach

the merits, or which reaches the merits but “is not the end of

the road for the losing party.” 1 Collier on Bankruptcy at

4 5.07[5]. See also id. (listing orders courts have found to be

interlocutory).

ALPA and URPBPA brought their motions in February,

2005 to compel payment of the Supplemental Benefits as

“contested matters” in the main United bankruptcy case and

the court entered its ruling in the main bankruptcy case. See

Fed. R. Bank. Proc. 9014(a) (contested matter is initiated by

motion). Movants did not bring the motion as part of the

Pension Plan Termination Case then pending in the bank-

ruptcy court as a separate adversary proceeding, another form

of discrete judicial unit from which the parties took appeals.'°

10

An adversary proceeding resembles a non-bankruptcy civil action

and is initiated through the filing of a complaint. The applicable

22

The bankruptcy court’s February, 2005 order clearly

satisfied the standard for a final order that has been applied in

bankruptcy cases. The order not only resolved the con-

troversy on the merits, but, by requiring United to continue

the payments, also necessarily determined that, under the

terms of the post-petition agreement between ALPA and

United, United was required to pay the claimed amounts in

full and to pay them when they came due. App. A, 16a

(noting that payment provided retired pilots with “100¢ on

the dollar”).'' The February, 2005 order was akin to orders

considered final and appealable in other discrete proceedings

resolving disputes regarding claims in bankruptcy. F.g., /n re

Kids Creek Partners, L.P., 200 F.3d 1070, 1073 (7th Cir.

2000) (priority of claim for administrative costs and fees); /n

re Fowler, 394 F.3d 1208 (9th Cir. 2005) (priority of tax

claim); In re Miller, 284 B.R. 734 (10th Cir. B.A.P. 2002)

(priority of claim for child and spousal support). See also In

re UAL Corp., 411 F.3d 818, 821 (7th Cir. 2005).

Because the February, 2005 order was final in the context

of the bankruptcy case, United’s failure to appeal should have

resulted in a forfeiture of its right to argue in October, 2005

that it was no longer obligated to make these payments. See

Budinich v. Becton Dickinson and Co., 486 U.S. 196, 202-03

(1988) (noting “jurisdictional consequences of untimely

appeal’); In re Kids Creek Partners, L.P., 200 F.3d at 1073

(if an order “was a final decision, appealable to the district

court under 28 U.S.C. § 158(a), then failure to take a timely

appeal puts that order beyond review,” and “all claims that

bankruptcy procedural rules track the Federal Rules of Civil Procedure.

See Part VII, Fed. R. Bankr. Proc.

'' The bankruptcy court fully addressed the parties’ dispute and ruled

that the payment priority of the Supplemental Benefits under bankruptcy

law did not need to be decided because the post-petition agreement

between United and ALPA required that United continue the payiments

regardless of the priority. Apr. N, 135a-136a.

23

could have been raised at that time were forfeited”). See also

In re Gould, 977 F.2d 1038, 1040 (7th Cir. 1992) (party may

not “challenge the efficacy” of a bankruptcy court’s final

order if it never appealed the order). Accordingly, as of

October, 2005, United should have been bound by the

February, 2005 order requiring it to continue paying the

Supplemental Benefits. Schering Corp. v. Ill. Antibiotics Co.,

89 F.3d 357, 358 (7th Cir. 1996) (“a ruling by the trial court,

in an earlier stage of the case, that could have been but was

not challenged on appeal is binding in subsequent stages of

the case’).

Instead, without discussion, and contrary to long-estab-

lished bankruptcy practice, the court of appeals treated the

February, 2005 order as interlocutory, as if it were not entered

in a bankruptcy case and, as such, ruled that United had not

waived its right to challenge the bankruptcy court’s ruling

later on. By failing to address the prior order in bankruptcy

terms, the court of appeals’ ruling resembled the discredited

notion that the final order in a bankruptcy case is the order

entered at the end of the entire bankruptcy case. This ruling

will create new havoc in the administration of a bankruptcy

case. See Becton Dickinson, 486 U.S. at 201 (considerations

of finality “are not abstractions” but pertain to “the smooth

functioning of our judicial system”).

B. The Court’s Approach Introduces New Uncer-

tainty into the Administration of Bankruptcy

The courts have long considered the approach of the court

below unworkable because it is at odds with the peculiar

needs of a bankruptcy case, in which discrete matters must be

resolved along the way in order to reach an overall resolution

of the case. F.g., In re Christian, 804 F.2d 46, 48 (3d Cir.

1986) (awaiting outcome of entire case before appeal can be

heard is neither “desirable or practical”); /n re Martin Bros.

Toolmakers, Inc., 796 F.2d 1435, 1437 (11th Cir. 1986)

24

(finality “cannot be limited to the last order concluding the

bankruptcy case”). The Court’s ruling thus undermines the

ability to resolve the myriad individual matters that must be

addressed in order to complete the resolution of a bank-

ruptcy case.

Courts have long recognized that the concept of finality in

bankruptcy appeals is “considerably more flexible” than in

ordinary civil litigation because resolution of the larger

bankruptcy case necessarily depends on the prior, authori-

tative disposition of the many subsidiary disputes that arise

during the case in the form of separate proceedings. See /n re

Gould, 977 F.2d at 1041; In re Martin Bros. Toolmakers, Inc..,

796 F.2d at 1437 (flexible approach to appeals is “vital” in

bankruptcy, since each “claim represents a variable which

must be quantified before ... a workable reorganization plan

[is] adopted”). The resolution of a bankruptcy case has been

aptly described as “assembling a jigsaw puzzle. It is

necessary to start by putting some of the pieces firmly in

place.” Hennigan, 12 Bank. Dev. J. at 601.

Like the jigsaw puzzle, a bankruptcy case is resolved by

conclusively securing the various pieces that will eventually

comprise the whole. Clear rules regarding when individual

disputes must be appealed, and therefore forfeited if not

timely appealed, are a necessary prerequisite to concluding a

bankruptcy case in which numerous parties, claims, and

transactions must be addressed before a debtor can propose a

reorganization plan and determine how creditors will be paid.

See Martin Bros. Toolmakers, Inc., 796 F.2d at 1437 (reor-

ganization cases “proceed most smoothly when at least some

variables become fixed and operate as the basis for further

negotiation”). Adherence to the forfeiture rule, which is

“black letter law” regarding non-appealed final orders, see

Hennigan, 12 Bank. Dev. J. at 585, aids the overall resolution

of bankruptcy cases by forcing parties to address substantive

disputes at the time they are decided.

25

Courts and commentators have noted that the subject of

finality in bankruptcy cases is “complex,” Jn re Huebner, 986

F.2d 1222, 1223 (8th Cir. 1993), “murky,” Khan & Nate’s

Shoes No. 2, Inc. v. First Bank of Whiting, 908 F.2d 1351,

1354 (7th Cir. 1990) and greatly in need of systemic,

organizing rules. Hennigan, 12 Bankr. Dev. J. at 622-26

(suggesting that courts regularize their approach following

the principles developed under 28 U.S.C. § 1291). The ruling

below, by permitting a debtor to preserve the ability to

challenge a substantive ruling for an indeterminate time

period, fosters uncertainty and prolongs—-rather than fore-

shortens—the resolution of individual disputes that must be

accomplished for complete resolution of a bankruptcy case.

This ruling opens a new ground for confusion in an already

complicated maze of case law that would benefit from

decisive guidance by this Court. If left to stand, the ruling

below by an influential court of appeals will leave bankruptcy

litigants in a state of perpetual uncertainty regarding the

finality of unappealed rulings made during the course of the

case.

This Court should grant the writ in order to clarify the rules

establishing final orders and application of the forfeiture

doctrine in bankruptcy.

26

CONCLUSION

For the foregoing reasons the writ should be granted.

Respectfully Submitted,

MICHAEL E. ABRAM *

BABETTE A. CECCOTTI

THOMAS N. CIANTRA

ZACHARY N. LEEDS

CLAIRE K. TUCK **

COHEN, WEISS AND SIMON LLP

330 West 42nd Street

New York, NY 10036

(212) 563-4100

Attorneys for Petitioner Air Line ,

* Counsel of Record Pilots Association, International

** Admitted in New Jersey only.

January 23, 2007