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Delphi Pensioners Get In-Court Boost After Trump Orders Review

Oct. 28, 2020, 2:35 PM

Delphi Corp. retirees got a boost in their bid to undo a Sixth Circuit decision upholding the 2009 government takeover of their pension plans, when the appeals court ordered the Pension Benefit Guaranty Corp. to respond to their petition for rehearing.

The petition argues the court was wrong to conclude that they didn’t have a property interest in the full amount of their vested pension benefits. The move by the court Tuesday is seen as increasing the likelihood that the case will be reheard.

It comes one week after President Donald Trump ordered various cabinet members to intervene on behalf of the Delphi retirees. Trump’s order directs cabinet members to review the retirees’ lost pension benefits and evaluate the feasibility of enacting corrective legislation or restoring their pension plan to its prior status.

Restoring full benefits to the Delphi retirees would be a complicated process that could require the creation of a shell company without a clear funding source, former PBGC officials told Bloomberg Law.

The retirees seek a redo of the U.S. Court of Appeals for the Sixth Circuit’s September decision rejecting their lawsuit against the PBGC, which they say arbitrarily terminated their pension plan in violation of their due process rights. In rejecting their due process claims, the Sixth Circuit wrongly held that the retirees lacked a property interest in the unfunded portion of their pension benefits, which contravenes U.S. Supreme Court precedent, the retirees said in their petition for rehearing.

The litigation stems from the PBGC’s 2009 decision to assume more than $6.2 billion in new liabilities as the trustee of six Delphi pension plans covering about 20,000 non-unionized retirees. The retirees alleged that the PBGC improperly terminated the plans through an agreement with Delphi and General Motors Corp. following Delphi’s 2005 bankruptcy filing. The retirees said the PBGC should have used its negotiating leverage with GM—which owned Delphi before a 1999 corporate spinoff—to force GM to assume their pension liability.

The Sixth Circuit ruled against the retirees, saying they failed to show that the plan termination was arbitrary and capricious. The PBGC made its decisions while addressing many competing interests, including “the government’s urgent attempt to save GM and the automotive industry” in the aftermath of the 2009 financial crisis, the court said.

Miller & Chevalier Chtd. represents the retirees. The PBGC represents itself.

The case is Black v. PBGC, 6th Cir., No. 19-1419, order directing response 10/27/20.

To contact the reporter on this story: Jacklyn Wille in Washington at jwille@bloomberglaw.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Nicholas Datlowe at ndatlowe@bloomberglaw.com