2006 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

7-26-2006

In Re: Kaiser Alum

Precedential or Non-Precedential: Precedential

Docket No. 05-2695

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PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

 

No. 05-2695

 

IN RE: KAISER ALUMINUM CORPORATION,

 Debtor

Pension Benefit Guaranty Corporation,

 Appellant

 

Appeal from the United States District Court

for the District of Delaware

(D.C. Civil No. 04-cv-00145)

District Judge: Honorable Joseph J. Farnan, Jr.

 

Argued April 3, 2006

Before: RENDELL, SMITH and ALDISERT, Circuit Judges

(Filed: July 26, 2006)

 
2

James L. Eggeman

Charles L. Finke [ARGUED]

Pension Benefit Guaranty Corporation

1200 K Street, N.W.

Washington, DC 20005

 Counsel for Appellant

Daniel J. DeFranceschi

Richards, Layton & Finger

One Rodney Square

P.O. Box 551

Wilmington, DE 19899

Gregory M. Gordon [ARGUED]

Daniel P. Winikka

Jones Day

2727 North Harwood Street

Dallas, TX 75201

 Counsel for Appellees

 

OPINION OF THE COURT

 

RENDELL, Circuit Judge.

The Employee Retirement Income Security Act of 1974

(“ERISA”) permits an employer seeking reorganization in

Chapter 11 bankruptcy to terminate a pension plan if the

employer satisfies certain notice requirements and demonstrates

to a bankruptcy court that it will be unable to pay its debts and

continue in business outside of Chapter 11 unless the pension
3

plan is terminated. ERISA § 4041(c)(2)(B)(ii)(IV), 29 U.S.C.

§ 1341(c)(2)(B)(ii)(IV) (2000). Courts typically refer to this

requirement for a plan termination as the “reorganization test.”

The instant case raises a question of first impression among the

courts of appeals: when a Chapter 11 debtor seeks to terminate

multiple pension plans simultaneously under the reorganization

test, should a court apply the test to each plan independently, or

to all of the plans in the aggregate?

Kaiser Aluminum Corporation and twenty-five of its

affiliates (“Kaiser”) are debtors in a Chapter 11 bankruptcy. As

part of their reorganization, they requested that the Bankruptcy

Court approve the termination of six pension plans under the

reorganization test. The Bankruptcy Court applied the test to all

six plans in the aggregate and concluded that their termination

was required for Kaiser to emerge from Chapter 11. The

Pension Benefit Guaranty Corporation (“PBGC”), which is

responsible under ERISA to provide benefits to participants in

terminated plans, appealed the Bankruptcy Court’s decision,

arguing that it should have applied the reorganization test on a

plan-by-plan basis to each of Kaiser’s pension plans. Under this

approach, the PBGC contends that some of Kaiser’s plans

would not fulfill the reorganization test, and therefore could not

be terminated. The District Court upheld the Bankruptcy

Court’s decision and the PBGC appealed to our Court.

We conclude that the Bankruptcy Court correctly applied

the reorganization test in the aggregate to all of the plans Kaiser

sought to terminate. Congress has not provided any guidance

as to how to apply the reorganization test given the fact pattern

before us, and the plan-by-plan approach appears unworkable.
4

By contrast, applying the reorganization test to multiple plans

in the aggregate is straightforward. A basic principle of

statutory construction is that we should avoid a statutory

interpretation that leads to absurd results. See Griffin v. Oceanic

Contractors, Inc., 458 U.S. 564, 575 (1982). Because it would

be anomalous for Congress to mandate an unworkable approach

to the reorganization test, we read ERISA as requiring an

aggregated analysis.

We are also persuaded that applying the reorganization

test on a plan-by-plan basis would result in unfair and

inequitable consequences in that it would require bankruptcy

courts to give preference to some similarly situated constituents

over others. The bankruptcy courts are courts of equity that are

guided by equitable principles. Absent a clear congressional

mandate to the contrary, we will not impose upon them an

approach to the reorganization test that would conflict with their

tradition of preventing unfairness in bankruptcy proceedings.

Congress must speak more clearly than it has in ERISA if it

wishes the bankruptcy courts to take a plan-by-plan approach to

the reorganization test. 

Finally, we consider, and reject, the PBGC’s arguments

based on legislative history, deference to its administrative

interpretation, and public policy. We will therefore affirm the

decision of the District Court upholding the Bankruptcy Court.
5

I.

A.

Kaiser is involved in all aspects of the aluminum

industry, including mining raw materials, refining them, and

manufacturing aluminum products. As of January 1, 2003,

Kaiser employed approximately 3,000 workers domestically.

In addition, it was responsible for the retiree benefits (primarily

medical) of more than 15,300 retirees and dependent spouses

and the pension benefits of over 11,000 retirees and

beneficiaries. In late 2001 and early 2002, weak industry

conditions, imminent debt maturities, burdensome asbestos

litigation, and growing legacy obligations for future retiree

medical and pension costs took its toll on Kaiser. Unable to

restructure their obligations outside of bankruptcy, Kaiser and

its related corporate entities filed for relief under Chapter 11 of

the Bankruptcy Code between February 2002 and January 2003.

Congress established the PBGC in 1974 as part of

ERISA. Its purpose is to encourage the continuation and

maintenance of private-sector defined benefit pension plans,

provide timely and uninterrupted payment of pension benefits,

and keep pension insurance premiums at a minimum. 29 U.S.C.

§ 1302(a). To this end, the PBGC provides a minimum level of

pension benefits to participants in qualified pension plans in the

event that the plans cannot pay benefits. As of September 30,

2005, the PBGC insured 44.1 million American workers

participating in 30,330 private-sector defined benefit pension

plans. PBGC, PBGC Performance and Accountability Report

for Fiscal Year 2005 1 (2005), available at
 1

The maximum pension benefit guaranteed by the PBGC is

set by law and adjusted yearly. See 29 U.S.C. §§ 1322(a)-(b).

For plans ended in 2006, workers who retire at age 65 can

receive up to $3,971.59 per month ($47,659.08 annually). The

guarantee is lower for those who retire early and higher for those

who retire after age 65. Maximum Guaranteed Benefits, 29

C.F.R. § 4011 App. B (2006); Benefits Payable in Terminated

Single-Employer Plans, 70 Fed. Reg. 72074 (Dec. 1, 2005).

6

http://www.PBGC.gov/docs/2005par.pdf(“PBGC Performance

Report”).

The PBGC is not funded by general tax revenues.

Rather, it collects insurance premiums from employers that

sponsor insured pension plans, earns money from investments,

and receives funds from pension plans it takes over. Id. at 1.

The PBGC pays monthly retirement benefits, up to a guaranteed

maximum, to about 683,000 retirees in 3,595 pension plans that

have terminated.1

 Including those who have not yet retired and

participants in multiemployer plans receiving financial

assistance, the PBGC is directly responsible for the current and

future benefits of 1.3 million active and retired workers whose

plans have failed. Id. at 2. The benefits guaranteed by the

PBGC are often substantially lower than the fully vested

pensions due to plan participants. See Mertens v. Hewitt

Assocs., 508 U.S. 248, 250 (1993). Since 1987, a plan’s

sponsor is liable to the PBGC for the total amount of unfunded

benefit liabilities to all participants and beneficiaries under the

plan. 29 U.S.C. § 1362(b).

B.
 2

An eighth pension plan, the Kaiser Aluminum Salaried

Employees Retirement Plan, was involuntarily terminated by the

PBGC on December 17, 2003 pursuant to 29 U.S.C. § 1342.

The termination of that plan is not at issue in this appeal.

7

As part of its reorganization, Kaiser originally sought to

replace seven pension plans that had been established in

connection with collective bargaining agreements (“CBAs”)

then in effect with various unions.2 The plans and associated

CBAs are listed in the table below:

PENSION PLAN UNION(S) COVERED

Kaiser Aluminum Pension Plan

(“KAP Plan”)

United Steelworkers of America

(“USWA”)

Kaiser Aluminum Tulsa Pension

Plan (“Tulsa Plan”)

USWA

Kaiser Aluminum Bellwood

Pension Plan (“Bellwood Plan”)

USWA; International Association

of Machinists & Aerospace

Workers (“IAM”)

Kaiser Aluminum Sherman

Pension Plan (“Sherman Plan”)

IAM
 3

The Inactive Plan is comprised of 28 prior pension plans for

certain former represented employees who are or were employed

by businesses that have been divested by the Debtors, with the

Debtors retaining certain pension benefit obligations for retirees.

8

Kaiser Aluminum Inactive Pension

Plan (“Inactive Plan”)3

USWA; IAM; United Automobile,

Aerospace, and Agricultural

Implement Workers of America

(“UAW”)

Kaiser Aluminum Los Angeles

Extrusion Pension Plan (“LA

Extrusion Plan”)

International Brotherhood of

Teamsters (“Teamsters”)

Kaiser Center Garage Pension Plan

(“Garage Plan”)

Teamsters Automotive Employees,

Local 78

These plans covered nearly 13,500 active hourly

workers, participants on leave or layoff, individuals who were

terminated from employment, retirees, and beneficiaries. On

January 11, 2004, Kaiser filed a motion seeking the Bankruptcy

Court’s approval to terminate all seven plans in a voluntary

“distress termination” under Title IV of ERISA, 29 U.S.C. §

1341(c)(2)(B)(ii). Kaiser asserted in its motion that it owed

nearly $48 million in unfunded minimum contributions for the

2003 plan year and would be required to make $230 million in

minimum contributions to the plans between 2004 and 2009. In

separate motions, Kaiser also requested that the Bankruptcy

Court (1) use its authority under 11 U.S.C. § 1113 to reject its

CBAs with USWA and IAM, under which several of the

pension plans had been established, and (2) authorize the
9

modification of retiree benefits pursuant to 11 U.S.C. § 1114.

Prior to the February 2, 2004 hearing at which the

Bankruptcy Court was to consider these motions, Kaiser

reached agreements with USWA, IAM, and the official

committee of salaried retirees (“1114 Committee”) providing

for consensual termination of the KAP Plan, Tulsa Plan,

Bellwood Plan, Sherman Plan, and Inactive Plan, and for the

institution of replacements for these plans. At the hearing,

Kaiser asked the Bankruptcy Court to approve these

agreements. The company had not yet reached agreements with

UAW or the Teamsters to terminate the Inactive Plan and the

LA Extrusion Plan, respectively.

At the hearing, Kaiser also withdrew its motion for

approval to terminate the Garage Plan on the grounds that it was

not underfunded. Thus, the Bankruptcy Court actually

considered only whether to terminate six of Kaiser’s seven

active plans.

The PBGC opposed Kaiser’s motion to terminate the six

pension plans. In its briefs and at the February 2, 2004 hearing,

the PBGC argued that the Bankruptcy Court should make

separate determinations of whether each pension plan that

Kaiser sought to terminate satisfied the reorganization test.

Thus, rather than considering whether Kaiser could afford to

fund all six plans in the aggregate, the PBGC urged the

Bankruptcy Court to determine whether the contributions

required for each individual plan, considered independently and

without regard to the obligations under the other plans,

jeopardized Kaiser’s ability to reorganize successfully. The
10

PBGC contended that the text and legislative history of ERISA

required such a “plan-by-plan” approach.

The PBGC acknowledged at the hearing that two plans

– the KAP Plan and the Inactive Plan – satisfied the

reorganization test for distress termination even if considered

under a plan-by-plan analysis. These plans were much larger

than the others and would clearly impose an unsustainable

burden on Kaiser. The PBGC contested only Kaiser’s request

to terminate the Tulsa Plan, Bellwood Plan, Sherman Plan, and

LA Extrusion Plan. The combined minimum funding

contributions for these four plans were projected to be roughly

$12.8 million between 2004 and 2009, less than six percent of

the estimated $230 million required to fund all of Kaiser’s

pension plans during that time frame. When these smaller plans

were considered on a plan-by-plan basis, rather than in the

aggregate with the KAP and Inactive Plans, the PBGC argued

that Kaiser could continue funding some or all of them and still

emerge successfully from Chapter 11 reorganization.

The Bankruptcy Court concluded that the PBGC’s planby-plan approach would violate the Bankruptcy Code’s

requirement that debtors bargain fairly and equitably with

unions. See 11 U.S.C. § 1113(b). The Bankruptcy Court

believed that considering the plans piecemeal would give

creditors “the kind of leverage that would force the debtor to

[initiate] bargaining . . . with one union and not with another.”

(Hr’g Tr., Feb. 2, 2004, at App. 445.) Likewise, debtors could

use a plan-by-plan approach to gain leverage against creditors

that Congress did not intend. The Court acknowledged that

Kaiser could maintain up to three of its smaller plans under the
11

PBGC’s plan-by-plan approach, but held that, in order to be fair

to all employees covered under the pensions, it would apply the

reorganization test by considering the company’s pension plans

in the aggregate.

Under this standard, the Bankruptcy Court found that the

reorganization test was satisfied with respect to all six plans that

Kaiser sought to terminate. In a February 5, 2004 order, the

Bankruptcy Court approved termination of the KAP Plan, the

Sherman Plan, the Tulsa Plan, and the Bellwood Plan, effective

upon the Court’s filing of a contemporaneous order approving

Kaiser’s agreements with USWA, IAM, and the 1114

Committee for consensual termination of these plans. Though

the Inactive Plan and the LA Extrusion Plan also satisfied the

reorganization test, the Bankruptcy Court refused to approve

their termination at that time because the CBAs that Kaiser had

with UAW and the Teamsters presented a contractual bar to

their termination. Kaiser has since reached agreements with

both UAW and the Teamsters to remove the contractual bar in

each of these CBAs, and the Bankruptcy Court has now

formally approved the termination of the Inactive Plan and the

LA Extrusion Plan.

The PBGC appealed the Bankruptcy Court’s decision to

the District Court, which upheld the Bankruptcy Court’s

aggregate analysis of the plans under the reorganization test.

The District Court concluded that ERISA did not mandate a

plan-by-plan analysis as urged by the PBGC. Furthermore, the

Court believed that ERISA’s reorganization test must be read in

light of § 1113 of the Bankruptcy Code, which requires debtors

to engage in fair and equitable bargaining with unions before
12

unilaterally modifying CBAs. In the District Court’s view,

fairness and equity required the Bankruptcy Court to consider

the plans in the aggregate. In re Kaiser Aluminum Corp.,

Civ.A. 04-145-JJF, 2005 WL 735551, at *3 (D. Del. Mar. 30,

2005). The PBGC timely appealed the District Court’s decision

to our Court.

II.

The Bankruptcy Court had jurisdiction under 28 U.S.C.

§ 157 and 28 U.S.C. § 1334(a). The District Court had

jurisdiction over the PBGC’s appeal under 28 U.S.C. §

158(a)(1). We have jurisdiction pursuant to 28 U.S.C. § 158(d).

We exercise plenary review of an order issued by a

district court sitting as an appellate court in review of a

bankruptcy court. In re Cellnet Data Sys., Inc., 327 F.3d 242,

244 (3d Cir. 2003). We will set aside the Bankruptcy Court’s

findings of fact if they are clearly erroneous and review its

conclusions of law de novo. Id.

III.

The question before us is whether the Bankruptcy Court

should have made separate determinations as to whether each of

the six plans Kaiser sought to terminate satisfied the

reorganization test, or whether it properly applied the

reorganization test to all six plans in the aggregate. “As in any

case of statutory construction, our analysis begins with the

language of the statute.” Hughes Aircraft Co. v. Jacobson, 525

U.S. 432, 438 (1999) (internal quotation omitted).
 4

The PBGC may institute proceedings for a plan’s involuntary

termination when it determines that:

(1) the plan has not met the

minimum funding standard

required under section 412 of Title

26 [of the United States Code], or

has been notified by the Secretary

of the Treasury that a notice of

deficiency under section 6212 of

Title 26 has been mailed with

respect to the tax imposed under

section 4971(a) of Title 26,

(2) the plan will be unable to pay

benefits when due,

13

A.

Title IV of ERISA establishes the exclusive means of

terminating single-employer pension plans. 29 U.S.C. §

1341(a)(1); Hughes Aircraft, 525 U.S. at 446. Plans may be

terminated voluntarily by a plan sponsor or involuntarily by the

PBGC. A plan sponsor may voluntarily terminate a pension

plan in one of two ways. First, it may proceed with a “standard

termination” if it has sufficient assets to pay all benefit

commitments. 29 U.S.C. § 1341(b)(1)(D). Such a situation

does not implicate the PBGC’s insurance responsibilities.

Alternatively, if a plan’s assets are not sufficient to satisfy all

benefit liabilities, a plan sponsor may initiate a “distress

termination” under 29 U.S.C. § 1341(c).4
(3) the reportable event described

in [29 U.S.C. § 1343(c)(7)] has

occurred, or

(4) the possible long-run loss of the

corporation with respect to the plan

may reasonably be expected to

increase unreasonably if the plan is

not terminated.

29 U.S.C. § 1342(a).

14

A single-employer plan may terminate in a distress

termination only if the plan administrator provides affected

parties with at least sixty days of advance written notice of its

intent to terminate, 29 U.S.C. § 1341(b)(2)(B); 29 C.F.R. §

4041.43, the administrator provides the PBGC with certain

information about the termination no more than 120 days after

the proposed termination date, 29 U.S.C. § 1341(b)(2)(A); 29

C.F.R. § 4041.45, and the PBGC determines that the plan

sponsor meets one of four “distress tests” under 29 U.S.C. §

1341(c)(2)(B). The tests are known as (1) the liquidation test,

(2) the reorganization test, (3) the inability to continue in

business test, and (4) the unreasonably burdensome pension cost

test. 29 U.S.C. §§ 1341(c)(2)(B)(i)-(iii); 29 C.F.R. §

4041.41(c)(4). In the instant case, Kaiser sought a distress

termination of its plans under the reorganization test only.

Four requirements must be satisfied for a distress

termination under the reorganization test. First, the plan

sponsor must have filed a petition seeking reorganization in
 5

By contrast, the existence of a CBA does not prevent the

PBGC from terminating a plan involuntarily. 29 U.S.C. § 1342.

15

bankruptcy. Second, the bankruptcy case must not have been

dismissed as of the proposed termination date. Third, the plan

sponsor must submit to the PBGC a request for bankruptcy

court approval of the plan termination. 29 U.S.C. §§

1341(c)(2)(B)(ii)(I)-(III). Finally, the bankruptcy court must

“determine[] that, unless the plan is terminated, [the plan

sponsor] will be unable to pay all its debts pursuant to a plan of

reorganization and will be unable to continue in business

outside the chapter 11 reorganization process and approve[] the

termination.” Id. § 1341(c)(2)(B)(ii)(IV).

A plan sponsor may not voluntarily terminate a plan “if

the termination would violate the terms and conditions of an

existing collective bargaining agreement.” 29 U.S.C. §

1341(a)(3).5

 However, a plan sponsor seeking a distress

termination while in bankruptcy may remove a contractual bar

to a plan’s termination by receiving the bankruptcy court’s

approval to unilaterally reject or modify the CBA under 11

U.S.C. § 1113. Section 1113 requires, among other things, that

the debtor

make a proposal to the authorized

representative of the employees

covered by such agreement . . .

which provides for those necessary

modifications in the employees

benefits and protections that are
16

necessary to permit the

reorganization of the debtor and

assures that all creditors, the debtor

and all affected parties are treated

fairly and equitably.

11 U.S.C. § 1113(b)(1)(A). A bankruptcy court must refuse to

reject or modify a CBA if the debtor’s proposal to the union was

not fair and equitable. Wheeling-Pittsburgh Steel Corp. v.

United Steelworkers, 791 F.2d 1074, 1093 (3d Cir. 1986).

B.

ERISA does not explicitly state how the reorganization

test applies when an employer seeks to terminate several

pension plans at once. The reorganization test is satisfied when

a bankruptcy court determines that a plan sponsor will be unable

to continue business outside of Chapter 11 “unless the plan is

terminated.” 29 U.S.C. § 1341(c)(2)(B)(ii)(IV) (emphasis

added). The statute lacks any parallel provision for cases in

which multiple plans are at issue. Other provisions of § 1341

likewise set forth requirements for the voluntary termination of

“a single-employer plan,” but do not specify how the

requirements should apply in the context of multiplan

terminations. See, e.g., id. § 1341(a)(1) (noting that ERISA

provides the exclusive means under which “a single-employer

plan may be terminated”); id. § 1341(a)(3) (barring voluntary

termination of a “plan” that would violate the terms of an

existing CBA); id. § 1341(b)(1) (listing the general

requirements for a plan administrator to terminate a “singleemployer plan” under a standard termination); id. §
17

1341(c)(2)(B) (requiring the PBGC to determine whether the

sponsor of a “plan” satisfies one of the distress criteria). 

Absent any express statutory instruction about how the

reorganization test applies in the multiplan context, we must

examine ERISA’s text for indicia of congressional intent on the

issue. See Lamie v. United States Trustee, 540 U.S. 526, 534

(2004) (“The starting point for discerning congressional intent

is the existing statutory text . . . .”). The parties have not cited,

and we have not found, any case in which a court has performed

such an analysis. In every case that we have identified in which

a debtor sought to terminate multiple pension plans under the

reorganization test, bankruptcy courts have applied an aggregate

analysis, apparently without protest from the PBGC. See In re

Aloha Airgroup, Inc., No. 04-3063, 2005 WL 3487724, at *1

(Bankr. D. Haw. Dec. 13, 2005), vacated as moot, No. 05-

00777, 2006 WL 695054, at * 3 (D. Haw. Mar. 14, 2006); In re

Philip Servs. Corp., 310 B.R. 802, 808 (Bankr. S.D. Tex. 2004);

In re Wire Rope Corp. of Am., 287 B.R. 771, 777-78 (Bankr.

W.D. Mo. 2002). However, these courts provided no rationale

as to why they employed the aggregate approach and did not

discuss whether they considered an alternate approach. Thus,

these cases provide us with very little guidance or authority as

to how to interpret ERISA’s text.

The PBGC argues that Congress’s use of the singular

terms “single-employer plan” and “plan” mandates a plan-byplan approach to terminations under § 1341 generally, and

under the reorganization test in particular. In its view, ERISA

defines the reorganization test in terms of a singular “plan”

because Congress intended that bankruptcy courts would
18

consider independently each plan that an employer seeks to

terminate. Had Congress meant for courts to apply the

aggregate approach to the reorganization test, the PBGC urges

that § 1341(c)(2)(B)(ii)(IV) would instruct bankruptcy courts to

determine whether an employer can continue in business outside

Chapter 11 “unless the plans are terminated.”

To support its textual interpretation, the PBGC notes that

Congress chose to use the singular terms “single-employer

plan” or “plan” throughout Title IV in a manner that it contends

created a plan-specific statutory scheme to govern the singleemployer plan termination insurance program. See, e.g., 29

U.S.C. § 1321 (detailing when a “plan” is covered by the

termination insurance program); id. § 1322 (identifying the

benefits guaranteed under a “single-employer plan”); id. § 1342

(granting the PBGC authority to involuntarily terminate a

“single-employer plan” and establishing the criteria on which to

evaluate a “plan”); id. § 1344(a) (establishing asset allocation

scheme for a “single-employer plan” that is terminated); id. §

1347 (setting forth requirements for restoration of a terminated

“plan”); id. § 1348(a) (“For purposes of this subchapter the

termination date of a single-employer plan is . . . .” (emphasis

added)); id. § 1362 (imposing liability on the sponsor of a

“single-employer plan” that is terminated). Furthermore, the

fact that Congress used the plural “plans” in certain Title IV

provisions shows that it was cognizant of the different

contextual uses of the singular “plan” and plural “plans.” See

id. § 1302(a) (stating that the purposes of Title IV are “to

encourage the continuation and maintenance of voluntary

private pension plans” and “to provide for the timely and

uninterrupted payment of pension benefits . . . under plans”
19

(emphasis added)); id. § 1303(a) (mandating that the PBGC

audit annually a “statistically significant number of plans”

terminating in standard terminations); id. § 1310(a) (requiring

plan sponsors to provide “information . . . necessary to

determine the liabilities and assets of plans” covered by

ERISA). Given that ERISA “is a comprehensive and reticulated

statute” that Congress drafted with care, Nachman Corp. v.

Pension Benefit Guar. Corp, 446 U.S. 359, 361 (1980), the

PBGC urges us to conclude that Congress intentionally defined

the reorganization test in terms of a singular “plan” and that this

choice reflects Congress’s intent that the test should be applied

on a plan-specific basis.

We disagree with the PBGC’s textual analysis. Its

“linguistic argument makes too much out of too little.” United

States v. Fior D’Italia, Inc., 536 U.S. 238, 244 (2002). The use

of the singular form of “plan” in § 1341 does not constitute a

congressional mandate to the bankruptcy courts to apply a planby-plan approach to the reorganization test. As a general matter

of statutory construction, the singular form of a word

“include[s] and appl[ies] to several persons, parties, or things”

“unless the context indicates otherwise.” 1 U.S.C. § 1. Here,

nothing about the use or context of the singular terms “plan” or

“single-employment plan” in ERISA suggests that “application

of the typical rule of statutory construction set forth in 1 U.S.C.

§ 1 would be inappropriate.” Toy Mfrs. of Am., Inc. v.

Consumer Prods. Safety Comm’n, 630 F.2d 70, 74 (2d Cir.

1980).

Furthermore, we do not think that Congress intended that

its use of the singular “plan” would require a plan-by-plan
20

approach to the reorganization test because, as the statute is

currently written, such an approach is essentially unworkable.

This is because the reorganization test cannot be rationally

applied on a plan-by-plan basis unless a court makes basic

assumptions about the order in which the plans should be

considered and the status of the other plans that the employer is

seeking to terminate. ERISA conspicuously fails to provide any

ground rules whatsoever about how courts could employ a planby-plan analysis. If Congress had intended the bankruptcy

courts to employ the reorganization test on a plan-by-plan basis,

it would have done more than simply employ the singular form

of “plan” in § 1341; it would also have provided some details

about how courts are to apply such an approach. ERISA as it is

currently drafted leaves open too many questions about how to

engage in a plan-by-plan analysis for us to conclude that

Congress envisioned such an approach in the multiplan context.

A brief hypothetical illustrates the problems inherent in

applying the reorganization test on a plan-by-plan basis under

the current statutory scheme. Assume that a debtor has three

pension plans, each of which will cost $20 million annually.

The evidence shows that the debtor can devote no more than

$40 million annually to its pension liabilities and continue in

business outside of Chapter 11. Under the PBGC’s plan-byplan approach, a bankruptcy court would approve the

termination of just one plan because the debtor could afford to

fund two of the three. But which plan should be terminated?

Based simply on their cost, any of the plans could conceivably

be eliminated; which one depends wholly on the mechanics of

how the bankruptcy court applies the reorganization test. For

example, the order in which the bankruptcy court examines the
 6

When presented with a similar hypothetical at oral argument,

counsel for the PBGC stated that a bankruptcy court should look

at each plan separately and not consider the cost of the other

plans at all. But this approach moves the bankruptcy court no

closer to deciding which of the three plans should be terminated,

and could easily result in the continued effectiveness of plans

which, in the aggregate, are unaffordable. Without some

principled resolution to this problem, the plan-by-plan approach

is not feasible.

21

plans is potentially decisive (i.e., the first two considered will be

deemed affordable, and the third one will not). Likewise, when

examining one plan, the bankruptcy court must make a critical

assumption about the status of the other two plans. A court

would deem any one plan to be affordable if it assumed that one

or both of the other plans had been terminated, and it would

conclude that any plan is unaffordable if it assumed that the

other two plans still existed. Thus, the outcome of a plan-byplan analysis changes dramatically based on the ground rules

that a court employs.6

These are fundamental problems with applying the

reorganization test on a plan-by-plan basis, yet Congress did

nothing to address, let alone resolve, them. Nor are these

problems merely theoretical. In the instant case, the Bankruptcy

Court noted that, if the KAP and Inactive Plans were terminated

first, Kaiser could afford to fund as many as three of the four

smaller plans (i.e. the Tulsa, Sherman, LA Extrusion, and
 7

Counsel for the PBGC suggested at oral argument that, if the

KAP and Inactive Plans were terminated, Kaiser could have

afforded all four of its smaller plans. But this was not the

finding of the Bankruptcy Court, which concluded that Kaiser

could maintain up to three plans, but “not more than that.”

(Hr’g Tr., Feb. 2, 2004, at App. 445.) The PBGC has not

pointed to any evidence that would cause us to question this

factual finding of the Bankruptcy Court.

22

Bellwood Plans).7 However, nothing in ERISA suggests that

the KAP and Inactive Plans should be terminated first under a

plan-by-plan analysis. A court could also conclude that it

should apply the reorganization test to the smallest plans first,

rather than in the manner that would require it to terminate the

fewest number of plans. If a court were to apply the

reorganization test to Kaiser’s plans in order of smallest to

largest, it would determine that Kaiser could not afford even the

smaller plans due to the cost of the KAP and Inactive Plans.

Similarly, if the Bankruptcy Court assumed while

applying the reorganization test to one plan that all the other

plans remained active, it would conclude that the reorganization

test was satisfied as to any of the plans considered

independently. The cost of the KAP and Inactive Plans would

make any other plan prohibitively expensive. On the other

hand, if one assumed that the KAP and Inactive Plans would be

eliminated, several of the smaller plans could be funded outside

of Chapter 11. We see no principled textual basis in ERISA to

adopt one set of assumptions over another.
23

A basic tenet of statutory construction is that courts

should interpret a law to avoid absurd or bizarre results. See

Demarest v. Manspeaker, 498 U.S. 184, 191 (1991) (applying

statute’s terms where the result was not “so bizarre that

Congress could not have intended it” (internal quotation

omitted)); Griffin, 458 U.S. at 575 (“It is true that interpretations

of a statute which would produce absurd results are to be

avoided if alternative interpretations consistent with the

legislative purpose are available.”). If we adopted the PBGC’s

interpretation of § 1341, we would be concluding that Congress

required courts to apply the reorganization test on a plan-byplan basis, but provided no guidance on the mechanics of this

approach, making it essentially unworkable. We will not adopt

a statutory construction that leads to such an anomalous result,

especially where the aggregate approach represents an

alternative that is “neither irrational nor arbitrary.” DiGiacomo

v. Teamsters Pension Trust Fund of Philadelphia and Vicinity,

420 F.3d 220, 228 (3d Cir. 2005).

Nor would we make the plan-by-plan approach workable

by “filling in the gaps” left by Congress ourselves. See Griggs

v. E.I. DuPont de Nemours & Co., 385 F.3d 440, 453 n.7 (4th

Cir. 2004). In the context of such an “enormously complex and

detailed statute,” Mertens, 508 U.S. at 262, whose text we

should be cautious about supplementing, Hughes Aircraft, 525

U.S. at 447, it is not appropriate for us to invent for the

bankruptcy courts the fundamental baseline assumptions

required to apply the reorganization test workably on a plan-byplan basis. To do so would require us to weigh sensitive policy

issues that have potentially important consequences for

employers, American workers, and the PBGC without any
24

meaningful guidance from Congress. “The authority of courts

to develop a ‘federal common law’ under ERISA is not the

authority to revise the text of the statute.” Mertens, 508 U.S. at

259 (internal citation omitted). We may develop federal

common law under ERISA only when it is “‘necessary to fill in

interstitially or otherwise effectuate the statutory pattern enacted

in the large by Congress.’” Fotta v. Trs. of the UMW, Health &

Ret. Fund of 1974, 165 F.3d 209, 211-212 (3d Cir. 1998)

(quoting Bollman Hat Co. v. Root, 112 F.3d 113, 118 (3d Cir.

1997)); see also Bill Gray Enters., Inc. Employee Health and

Welfare Plan v. Gourley, 248 F.3d 206, 220 n.13 (3d Cir. 2001)

(“[C]ourts have held that importing federal common law

doctrines to ERISA plan interpretation is generally

inappropriate . . . .”). The significant gap-fillers required to

apply a plan-by-plan approach workably are better developed by

a policy-making or legislative body than by this Court. See

DiGiacomo, 420 F.3d at 228.

The PBGC contends that “[i]t is difficult to imagine how

Congress could have spoken to the ‘precise question’ of whether

the distress termination requirements . . . apply to a sponsor on

a plan-by-plan basis more clearly than it did.” (PBGC Br. at

18.) To the contrary, we have no trouble envisioning how it

could have done so. It could have used the phrase “plan-byplan” in articulating the reorganization test, explicitly instructed

courts to apply the test to each plan independently, or given

even a modicum of guidance about how such an approach

should be applied and what assumptions should be used in the

multiplan context. Absent any such textual indicators of

congressional intent, we will not read them into the statute

ourselves. Instead, we adopt a construction of ERISA’s
25

reorganization test that does not lead to these problems, namely,

the aggregate approach.

C.

We find additional support for our textual analysis in the

fact that a plan-specific approach to the reorganization test

would disrupt the bankruptcy courts in their traditional role as

agents of equity. The PBGC would have the Bankruptcy Court

terminate some of Kaiser’s plans while leaving the others in

place, seemingly without a principled basis on which it could

make the determination of which workers to prefer over others.

We will not impose this result, which we believe would treat

Kaiser’s workers unfairly and inequitably, without a clear

congressional mandate.

The Supreme Court has long recognized that bankruptcy

courts are courts of equity that apply equitable principles in the

administration of bankruptcy proceedings. See Local Loan Co.

v. Hunt, 292 U.S. 234, 240 (1934) (“[C]ourts of bankruptcy are

essentially courts of equity, and their proceedings inherently

proceedings in equity.”). Though the enactment of the

Bankruptcy Code in 1978 “increased the degree of regulation

Congress imposed upon bankruptcy proceedings,” it did not

alter their “fundamental nature” as courts of equity. Official

Comm. of Unsecured Creditors of Cybergenics Corp. ex rel.

Cybergenics Corp. v. Chinery, 330 F.3d 548, 567 (3d Cir. 2003)

(en banc); see also Young v. United States, 535 U.S. 43, 50

(2002) (“[B]ankruptcy courts . . . are courts of equity and ‘apply

the principles and rules of equity jurisprudence.’” (quoting

Pepper v. Litton, 308 U.S. 295, 304 (1939))).
26

The “‘great principles of equity’” are aimed at “‘securing

complete justice’” for the parties before a court. Porter v.

Warner Holding Co., 328 U.S. 395, 398 (1946) (quoting Brown

v. Swann, 35 U.S. (10 Pet.) 497, 503 (1836)). Thus, the

bankruptcy courts have broad authority to act in a manner that

will prevent injustice or unfairness in the administration of

bankruptcy estates. See Pepper, 308 U.S. at 307-08 (“[I]n the

exercise of its equitable jurisdiction the bankruptcy court has the

power to sift the circumstances surrounding any claim to see

that injustice or unfairness is not done . . . .”); In re Combustion

Eng’g, Inc., 391 F.3d 190, 235 (3d Cir. 2004) (“Bankruptcy

courts are courts of equity, empowered to invoke equitable

principles to achieve fairness and justice in the reorganization

process.” (internal quotation omitted)). To this end, they may,

when necessary, “eschew[] mechanical rules,” Holmberg v.

Armbrecht, 327 U.S. 392, 396 (1946), “modify creditor-debtor

relationships,” United States v. Energy Res. Co., 495 U.S. 545,

549 (1990), and “craft flexible remedies that, while not

expressly authorized by the [Bankruptcy] Code, effect the result

the Code was designed to obtain,” Cybergenics Corp., 330 F.3d

at 568. See also 11 U.S.C. § 105(a) (authorizing bankruptcy

courts to “tak[e] any action or mak[e] any determination

necessary or appropriate to enforce or implement court orders

or rules, or to prevent an abuse of process.”); but see In re

Combustion Eng’g, 391 F.3d at 236 (“The general grant of

equitable power contained in § 105(a) cannot trump specific

provisions of the Bankruptcy Code, and must be exercised

within the parameters of the Code itself.”).

Section 1113 of the Bankruptcy Code illustrates the role

that the bankruptcy courts take in ensuring fairness during the
 8

Kaiser contends that the “fair and equitable” requirements of

§ 1113 and § 1114 apply directly in this proceeding because the

modification of several CBAs and approval of the 1114

Committee were necessary prerequisites for the termination of

its pension plans. We disagree. It was never necessary to the

terminations for Kaiser to alter its CBAs unilaterally through a

court order under § 1113 and § 1114. The alternative was for

Kaiser to reach consensual agreements with the unions and

retirees that provided for termination of the pensions. This is

precisely what occurred here, as Kaiser’s unions and 1114

Committee have all consented to the plan terminations. The

27

course of bankruptcy proceedings. Under this provision, a

bankruptcy court may permit a debtor to unilaterally reject or

modify an existing collective bargaining agreement only if the

court determines, inter alia, that the debtor has made a proposal

to the union that “assures that all creditors, the debtor and all

affected parties are treated fairly and equitably.” 11 U.S.C. §

1113(b)(1)(A) (emphasis added). Likewise, § 1114, which

prohibits a debtor from unilaterally terminating or modifying

retiree benefits without a court order, requires the debtor to

make a proposal for the modification of benefits to the

authorized representatives of the debtor’s retirees that treats all

affected parties “fairly and equitably.” Id. § 1114(f)(1)(A).

These sections also require the bankruptcy court to determine

that “the balance of the equities clearly favors” the motions

before granting them. Id. § 1113(c)(3); id. § 1114(g)(3). The

provisions underscore the importance of equitable principles for

bankruptcy courts, particularly in bankruptcies involving

unionized workers and employee retirement benefits.8
plain language of § 1113 and § 1114 makes clear that these

provisions are inapplicable where union and retiree

representatives agree to a debtor’s proposal; they apply only

where the proposal was rejected “without good cause.” See 11

U.S.C. § 1113(c)(2); id. § 1114(g)(2). Consequently, while §

1113 and § 1114 inform our view of the equitable goals of the

bankruptcy courts, the “fair and equitable” requirements in these

sections do not specifically govern this case.

28

We will not require the equitable principles under which

bankruptcy courts operate to be discarded when courts are

deciding whether to approve a pension plan termination under

the reorganization test. See In re US Airways Group, Inc., 296

B.R. 734, 746 (Bankr. E.D. Va. 2003) (holding that the

requirement under 29 U.S.C. § 1341(c)(2)(B)(ii)(IV) that the

bankruptcy court “approve the termination” of an ERISA plan

authorized the court to consider the “equities in the case”). We

are convinced that, in light of the unique facts of this case, the

Bankruptcy Court could not have applied the plan-by-plan

approach without by producing an unfair result that would have

violated principles of equity.

Had the Bankruptcy Court applied the reorganization test

on a plan-by-plan basis it would have had to pick and choose

between the six plans that Kaiser sought to terminate, deciding

that certain plans would remain active. Some of Kaiser’s

workers would receive their full pension benefits, while others

would receive no more than the amount guaranteed under

ERISA. It is likely that even workers within the same union

would be treated differently from each other because they
29

participated in different plans, not all of which would

necessarily be eliminated. Without some statutory basis or other

principled rationale for this result, such disparate treatment

smacks of arbitrariness. Under § 1113, “the focus of the

[bankruptcy court’s] inquiry as to ‘fair and equitable’ treatment

should be whether the [debtor’s] proposal would impose a

disproportionate burden on the employees,” WheelingPittsburgh, 791 F.2d at 1091, as compared to “creditors, debtor

and all of the affected parties,” 11 U.S.C. § 1113(b)(1)(A).

Here, the PBGC asked the Bankruptcy Court to burden certain

employees disproportionally as compared to other employees.

This strikes us as an unfair result, and it is one that a bankruptcy

court sitting in equity should not impose absent a clear mandate

from Congress.

When pressed at oral argument, the PBGC offered no

basis on which the Bankruptcy Court could make the difficult

decision of which of Kaiser’s four small plans should be

terminated under a plan-by-plan approach. It stated only that a

debtor can make this choice in whatever manner it wishes. But

this does little more than restate the problem before us. Here,

Kaiser has voluntarily chosen to terminate all six pension plans.

Thus, the “solution” the PBGC suggests does not apply in this

case.

It did apply in the case of US Airways Group. There, US

Airways sought to terminate only one of its four pension plans.

The affected workers were the company’s pilots, who had

“already given up more in pay and benefits than any other

employee group.” US Airways Group, 296 B.R. at 744. Not

surprisingly, the pilots felt “a particularly keen sense of having
 9

This reasoning explains why the Bankruptcy Court need not

account for any unfairness resulting from Kaiser’s decision not

to terminate the Garage Plan, which covered four active

employees, one employee on leave, and one whose employment

had been terminated. The Bankruptcy Court was not asked to

apply the reorganization test to the Garage Plan and,

consequently, was not itself responsible for the disparate

treatment between participants in the Garage Plan and those in

Kaiser’s other plans.

30

been shabbily treated” by the request to terminate their pension

plan. Id. They argued that it would be “highly unfair” to

terminate the pilots’ plan “while all the remaining employee

groups would keep their current pension benefits.” Id.

Nevertheless, the bankruptcy court approved the termination

under the reorganization test, contingent on the removal of the

contractual bar in the pilots’ CBA. Id. at 745-46. 

Unlike the case before us, the court in US Airways Group

was asked to apply the reorganization test to just one pension

plan. Under those circumstances, any unfairness inherent in the

termination was the result of the debtor’s business decision

about which plan to terminate, not the bankruptcy court’s roll of

the dice as to which plan should or should not be terminated.9

The PBGC contends that the result of applying an

aggregate approach is just as unfair as terminating some plans

and leaving others in place. Under the aggregated analysis,

more plans would be terminated, and more workers impacted,

than what is required for Kaiser to emerge from Chapter 11.
 10This argument draws on the requirement under § 1113 and

§ 1114 that a proposed modification to a CBA or to retirement

benefits be “necessary to permit the reorganization of the

debtor.” 11 U.S.C. § 1113(b)(1)(A); id. § 1114(f)(1)(A). In

Wheeling-Pittsburgh, we held that this requirement should be

“construed strictly to signify only modifications that the trustee

is constrained to accept because they are directly related to the

[c]ompany’s financial condition and its reorganization.” 791

F.2d at 1088. As stated above, supra note 8, § 1113 and § 1114

do not directly apply here because Kaiser has reached

consensual agreements with its unions and 1114 Committee to

terminate the plans.

31

The Bankruptcy Court itself acknowledged that it was not

necessary for Kaiser to terminate all of its plans to reorganize,

yet it terminated them all anyway. Surely, the PBGC argues, it

is not fair or equitable to strip an employee’s pension benefits

without any economic justification. Faced with a choice of

burdening some of the participants in Kaiser’s plans and

burdening them all, the PBGC contends that equity weighs in

favor of the former.10

We are not unsympathetic to this view. There is

undoubtedly a tension between treating similarly situated

workers alike and doing the least that is necessary for the

company to emerge from bankruptcy. However, we are

persuaded that, on the whole, an aggregate approach is more in

line with the objectives of the Bankruptcy Code.

As a practical matter, voluntary terminations under the
32

reorganization test always require an employer to bargain with

the representatives of its employees or retirees. See 11 U.S.C.

§ 1113(c)(2); id. § 1114(g)(2). When an employer seeks to

terminate multiple plans, participants in one plan will be less

likely to agree to a termination if doing so would open the door

to a decision by a bankruptcy court to single out their plan for

termination under the plan-by-plan approach, while leaving the

employer’s other plans intact. See US Airways Group, 296 B.R.

at 744 (describing union’s objection to being singled out for

termination of its pension benefits). And debtors will generally

be unable to select one plan among many for unilateral

termination without the consent of its participants because doing

so would violate the fair and equitable requirements of § 1113

and § 1114. Cf. Wheeling-Pittsburgh, 791 F.2d at 1091

(defining inquiry into “fair and equitable” in terms of a

“disproportionate burden” on employees). 

The consequence is that employers that could

conceivably restructure their pension liabilities and successfully

reorganize will have a harder time doing so under a plan-byplan approach. This would, in turn, lead to a higher number of

liquidations and, by extension, a higher number of overall plan

terminations. The result would be to leave all interested parties

– the PBGC, workers, retirees, and creditors – worse off as

compared to the same number of reorganizations. An approach

that results in unnecessary liquidations is neither fair nor

consistent the Bankruptcy Code’s preference for reorganization.

See Nordhoff Invs., Inc. v. Zenith Elecs. Corp., 258 F.3d 180,

190 (3d Cir. 2001) (noting the “strong public policy in favor of

maximizing debtor’s estates and facilitating successful

reorganization”); In re Baker & Drake, Inc., 35 F.3d 1348, 1354
33

(9th Cir. 1994) (“Congress’s purpose in enacting the

Bankruptcy Code was not to mandate that every company be

reorganized at all costs, but rather to establish a preference for

reorganizations, where they are legally feasible and

economically practical.”).

IV.

The PBGC has leveled several other arguments against

our reading of ERISA. It contends that the legislative history,

its administrative interpretation, and public policy support its

view that ERISA mandates a plan-by-plan approach. As with

the PBGC’s statutory analysis, we do not find its arguments on

these points to be persuasive.

A.

The PBGC points to a legislative trend to tighten the

restrictions on pension plan terminations as support for a planby-plan approach to the reorganization test. In 1986, Congress

established the four distress tests in the Single-Employer

Pension Plan Amendments Act (“SEPPAA”). Prior to the

enactment of SEPPAA, “a plan could be terminated voluntarily

at any time, regardless of the relationship between its assets and

liabilities.” E. Thomas Veal & Edward R. Mackiewicz, Pension

Plan Terminations 68 (2d ed. 1998). If the plan could not

provide the guaranteed benefits to pensioners, the PBGC would

pay the benefits and assess liability against the plan’s sponsor.

Id. at 68-69. Congress found that this system “encourage[d]

employers to terminate plans, evade their obligations to pay

benefits, and shift unfunded pension liabilities” to the PBGC.
34

H.R. Rep. No. 99-241, part 2, at 59 (1985), reprinted in 1986

U.S.C.C.A.N. 685, 717-18. SEPPAA was intended to heighten

the requirements for plan terminations.

In 1987, Congress passed the Pension Protection Act of

1987 (“PPA”) to restrict pension plan terminations further. PPA

made employers liable, for the first time, to the PBGC for the

full amount of unfunded benefit liabilities to all participants and

beneficiaries under the plan. See 29 U.S.C. § 1362. It also

applied the reorganization test to “[t]he plan sponsor or any

member of its controlled group,” whereas SEPPAA applied it

only to each “substantial member” of the control group. See 29

U.S.C. § 1341(c)(2)(B); Veal & Mackiewiz, supra, at 252 n.3.

Both changes increased the burden on employers seeking to

terminate pension plans. 

The PBGC contends that SEPPAA and PPA, taken

together, reflect a clear congressional purpose to limit the

circumstances under which pension plans may be voluntarily

terminated to instances where sponsors are suffering “severe

hardship.” H.R. Rep. No. 99-300, at 278 (1985), reprinted in

1986 U.S.C.C.A.N. 929; H.R. Rep. No. 99-241, part 2, at 59-60

(1985), reprinted in 1986 U.S.C.C.A.N. 717-18. In addition,

Congress intended to reduce the financial burdens on the PBGC

and increase the chance that a plan’s participants will receive

their full expected benefits. In the context of the reorganization

test, the PBGC argues that these objectives can only be achieved

if bankruptcy courts employ a plan-by-plan approach, which

prevents terminations that are economically unnecessary.

Our reading of the legislative history does not convince
35

us that Congress mandated a plan-by-plan analysis. At most,

the legislative history demonstrates that Congress had a general

intent to make it more difficult for employers to terminate

pensions; however, that is hardly determinative of whether, or

how, the reorganization test should be applied in the multiplan

context. As discussed above, we think it likely that a plan-byplan analysis would actually increase the overall number of

terminations and therefore conflict with the legislative intent on

which the PBGC relies. In any event, such a general legislative

purpose provides no guidance on the mechanics of applying the

reorganization test workably on a plan-by-plan basis. We view

the absence of any such guidance in the text of ERISA as more

indicative of congressional intent than anything the PBGC has

cited in the legislative record.

B.

The PBGC claims that we should defer to its

interpretation of the reorganization test under Chevron U.S.A.

Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837

(1984). We disagree.

Congress has delegated to the PBGC the power to adopt

rules and regulations that are necessary to carry out the purposes

of Title IV of ERISA, see 29 U.S.C. § 1302(b)(3), and the

Supreme Court has accorded Chevron deference to the PBGC’s

interpretation of ERISA on other occasions. See PBGC v. LTV

Corp., 496 U.S. 633, 652 (1990) (deferring to the PBGC’s antifollow-on policy); Mead Corp. v. Tilley, 490 U.S. 714, 725

(1989) (according Chevron deference to the PBGC’s

interpretation of 29 U.S.C. § 1344). However, deference to the
36

PBGC here is improper because the PBGC has neither the

expertise nor the authority to determine when a plan should be

terminated under the reorganization test. Issues relating to an

employer’s bankruptcy and reorganization are within the

expertise of bankruptcy courts, not the PBGC. Thus, ERISA

grants the bankruptcy courts alone the power to determine when

an employer “will be unable to pay all its debts pursuant to a

plan of reorganization and . . . continue in business outside of

chapter 11.” 29 U.S.C. § 1341(c)(2)(B)(ii)(IV). Where

Congress delegates to the courts, rather than administrative

agencies, the power to make determinations under a statute,

Chevron deference does not apply. See United States v. Mead

Corp., 533 U.S. 218, 226-27 (2001) (holding that administrative

implementation of a particular statutory provision qualifies for

Chevron deference when Congress delegated authority to

agency “to make rules carrying the force of law”); Murphy

Exploration and Prod. Co. v. U.S. Dep’t of Interior, 252 F.3d

473, 478 (D.C. Cir. 2001) (stating that “Chevron does not apply

to statutes that . . . confer jurisdiction on the federal courts”

because “such statutes do not grant power to agencies”);

Bamidele v. INS, 99 F.3d 557, 561 (3d Cir. 1996) (refusing to

defer to agency’s interpretation of a legal issue that is the

province of the courts).

Furthermore, even if we were to hold that the PBGC had

the authority to interpret § 1341(c)(2)(B)(ii)(IV), “[w]e will not

defer to ‘an agency counsel’s interpretation of a statute where

the agency itself has articulated no position on the question.’”

Connecticut General Life Ins. Co. v. Comm’r, 177 F.3d 136,

143-144 (3d Cir. 1999) (quoting Bowen v. Georgetown Univ.

Hosp., 488 U.S. 204, 212 (1988)); see also Southco, Inc. v.
 11Indeed, the PBGC’s counsel conceded at oral argument that

this is the first case in which the PBGC has articulated its

position that ERISA requires that the reorganization test be

applied on a plan-by-plan basis. Cf. In re Wire Rope Corp. of

Am., 287 B.R. 771, 772-73, 777-78 (Bankr. W.D. Mo. 2002)

(noting that the PBGC did not oppose termination of multiple

plans where court applied aggregate approach to reorganization

test). Counsel explained that, in other cases involving multiple

distress terminations, the plans were unsustainable under either

an aggregate or plan-by-plan analysis, so the PBGC never

asserted the position it has here. This supports our view that the

PBGC’s argument in the instant case is more akin to a litigation

strategy than an agency interpretation of a statute that is entitled

to deference. See Bowen, 488 U.S. at 213 (“Deference to what

appears to be nothing more than an agency’s convenient

litigating position would be entirely inappropriate.”).

37

Kanebridge Corp., 390 F.3d 276, 300 (3d Cir. 2004) (en banc)

(Roth, J., dissenting) (noting that agency position advanced for

the first time in litigation would “be entitled to no deference

whatsoever”). To merit deference, an agency’s interpretation of

the statute must be supported by regulations, rulings, or

administrative practice. Bowen, 488 U.S. at 212. It appears to

us that the PBGC first adopted the view that ERISA requires a

plan-by-plan analysis during the course of this litigation.11

Chevron deference is not appropriate under these circumstances.

Id. at 213.

The PBGC contends that it has promulgated a series of

rules that require that the voluntary termination of pensions
 12Nor is there any reason to defer to the PBGC’s interpretation

of these regulations. The rules on which the PBGC relies do

nothing more than adopt ERISA’s use of the singular “plan.”

“[T]he existence of a parroting regulation does not change the

fact that the question here is not the meaning of the regulation

but the meaning of the statute. An agency does not acquire

special authority to interpret its own words when, instead of

using its expertise and experience to formulate a regulation, it

has elected merely to paraphrase the statutory language.”

38

occur on a plan-by-plan basis. See 29 C.F.R. § 4041.41;

Distress Terminations and Standard Terminations of

Single-Employer Plans, 57 Fed. Reg. 59206 (1992);

Single-Employer Plan Terminations Under the Pension

Protection Act, 53 Fed. Reg. 1904 (1988); Special Procedures

Relating to the Reorganization Distress Test, 52 Fed. Reg.

38290 (1987); Distress Terminations of Single-Employer Plans

and Standard Terminations of Single-Employer Plans, 52 Fed.

Reg. 33318 (proposed Sept. 2, 1987); The Effects of the

Single-Employer Pension Plan Amendments Act of 1986 on

Voluntary Plan Terminations Initiated On or After January 1,

1986 and Before April 7, 1986, 51 Fed. Reg. 12489 (1986). But

these rules, like ERISA’s text, merely refer to the termination

requirements for a “plan.” They neither state that bankruptcy

courts should apply the reorganization test on a plan-by-plan

basis nor provide any guidance as to how courts would employ

such an approach in the context of multiplan terminations. In

short, contrary to the PBGC’s urging, the rules do not reflect an

administrative determination that ERISA requires a plan-byplan analysis.12 Because the PBGC cannot point to regulations,
Gonzales v. Oregon, 126 S. Ct. 904, 916 (2006).

39

rulings, or administrative practices in which it adopted the

position that it asserts here, both the deliberateness and

authoritativeness of its statutory interpretation are suspect.

Smiley v. Citibank (South Dakota), N.A., 517 U.S. 735, 741

(1996).

C.

Policy issues have provided the subtext for several of the

PBGC’s arguments in favor of a plan-by-plan approach and, at

times, the PBGC has brought these issues to the surface

explicitly. There is no question that this case implicates

significant policy concerns that potentially affect millions of

American workers and hundreds of businesses. Furthermore,

the PBGC is an important government entity whose interests are

not lightly ignored. We therefore address its policy arguments

briefly and comment on their role in our analysis.

The policy concerns in this case have formed two parallel

tracks. First, the PBGC has contended repeatedly that an

aggregate approach to the reorganization test harms American

workers who participate in ERISA plans because it subjects

them to plan terminations that are economically unnecessary.

Its fear is that our holding today will make it too easy to

terminate pension plans that are actually affordable and will

create an incentive for employers to terminate plans that they

would otherwise maintain. As a result, more workers will lose

their fully vested pensions and receive only the benefits
40

guaranteed by ERISA.

The second concern is that our holding will negatively

impact the PBGC itself. We take judicial notice of the fact that

the PBGC’s financial health has deteriorated sharply in recent

years. At the end of the 2005 fiscal year, the PBGC’s liabilities

exceeded its assets by $23.1 billion, a swing in its net position

of nearly $33 billion since 2000. PBGC Performance Report at

4; Congressional Budget Office, A Guide to Understanding the

Pension Benefit Guaranty Corporation 1 (2005), available at

http://www.cbo.gov/ftpdocs/66xx/doc6657/09-23-GuideToP

BGC.pdf. The PBGC noted in its brief that “[t]he issue

presented in this case recurs in other large bankruptcy cases in

which the agency is a guarantor of pension benefits.”

Interpreting ERISA in a way that triggers more plan

terminations, and thereby increases the burdens on the PBGC,

could undermine the PBGC’s already shaky financial position

and “pose a considerable risk to the single-employer termination

insurance program.” (PBGC Br. at 3.)

We do not downplay the significance of either argument.

They provide sound policy rationales for the result for which the

PBGC advocates and highlight the important interests at stake

in this case. Moreover, there is no question that the aggregate

approach may, in some cases, lead to results that are less than

ideal for workers and for the PBGC. Nevertheless, “[w]e do not

sit here as a policy-making or legislative body.” DiGiacomo,

420 F.3d at 228. There are no clear answers to the difficult

policy issues involved in this case and, in any event, their

resolution is better left to Congress than the courts. We have

taken Congress’s failure to provide a shred of guidance on how
41

to apply a plan-by-plan approach as indicative of its intent. If

Congress perceives our holding to be in error, the cure is to

amend ERISA. See Griffin, 458 U.S. at 576.

V.

For the reasons stated above, we conclude that when an

employer in Chapter 11 bankruptcy seeks to terminate multiple

pension plans voluntarily under the reorganization test,

Congress intended the bankruptcy courts to apply the test to all

of the plans in the aggregate. Consequently, we will affirm the

order of the District Court upholding the Bankruptcy Court’s

conclusion that Kaiser had satisfied the reorganization test with

respect to all six plans that it sought to terminate.