third circuit opinion in visteon case

Upload: dealbook

Post on 10-Apr-2018

225 views

Category:

Documents


0 download

TRANSCRIPT

  • 8/8/2019 Third Circuit Opinion in Visteon Case

    1/24

    Page 1Industrial Div. of the Communications Workers of America v.

    Visteon Corp. (In re Visteon Corp.), 612 F.3d 210 (3d Cir. 2010)

    United States Court of Appeals, Third Circuit.

    IN RE VISTEON CORPORATION, ET AL. IUE-CWA, THE INDUSTRIAL DIVISION OF THE

    COMMUNICATIONS WORKERS OF AMERICA, AFL-CIO, CLC, Appellant, v. VISTEONCORPORATION, DEBTORS AND DEBTORS IN POSSESSION; and THE OFFICIAL

    COMMITTEE OF UNSECURED CREDITORS OF VISTEON CORPORATION, Appellees.

    No. 10-1944.

    Argued May 28, 2010.

    Opinion filed July 13, 2010. Corrected by Order

    July 15, 2010. Corrected by Order July 19, 2010.

    (*1)

    Thomas M. Kennedy, Esq. (Argued), Susan M. Jennik, Esq. Kennedy, Jennik & Murray, 113University Place, 7th Floor New York, NY 10003, Attorney for Plaintiff-Appellant.

    Susan E.Kaufman, Esq., Heiman, Gouge & Kaufman, 800 King Street, Suite 303,Wilmington, DE 19801, Attorney for Plaintiff-Appellant.

    Steven D. McCormick, Esq. (Argued), Andrew B. Bloomer, Esq., Patrick M. Bryan, Esq.,Kirkland & Ellis, 300 North LaSalle Street Suite 2400, Chicago, IL 60654. (*3) Laura D.Jones. Esq., James E. O'Neill, III, Esq., Pachulski Stang Ziehl & Jones,; Mark M. Billion;

    919 North Market Street, P.O. Box 8705, 17th Floor, Wilmington, DE 19801, Attorneys forDefendant-Appellee Visteon Corporation

    Robert J. Stark, Esq. (Argued), Howard L. Siegel, Esq., Brown Rudnick, 7 Times Square,47th Floor New York, NY 10036, William P. Bowden, Esq., Gregory A. Taylor, Esq., Ashby &Geddes 500 Delaware Avenue, P.O. Box 1150, 8th Floor, Wilmington, DE 19899, Attorneysfor Defendant-Appellee Official Committee of Unsecured Creditors.

    On Appeal from the United States DistrictCourt for the District of Delaware; No. 10-cv-00091, District Judge: Judge Michael M.

    Baylson (Specially Presiding). (*2)

    Before: McKEE, Chief Judge, and RENDELLand STAPLETON, Circuit Judges.

    OPINION

    McKEE, Chief Judge.

    The Industrial Division of theCommunications Workers of America ("IUE-

    CWA" or "the union"), as the representative(*4) of approximately 2,100 retirees from

    Visteon Corporation's manufacturing plantsin Connersville and Bedford, Indiana,appeals the district court's order, affirming

    the bankruptcy court's order permittingVisteon to terminate retiree health and lifeinsurance benefits without complying with theprocedures set forth in 11 U.S.C. 1114.Both courts reasoned that, notwithstandingthe language of that statute, it would beunreasonable to interpret 1114 as limitingan employer's right to modify or terminatebenefits during the pendency of a Chapter 11bankruptcy proceeding, if the employer couldunilaterally terminate those benefits outside

    of bankruptcy pursuant to a reservationof rights clause in the benefit plan. Since

  • 8/8/2019 Third Circuit Opinion in Visteon Case

    2/24

    Page 2Industrial Div. of the Communications Workers of America v.

    Visteon Corp. (In re Visteon Corp.), 612 F.3d 210 (3d Cir. 2010)

    Visteon reserved the right to unilaterallyterminate the retiree benefits at issue here,the courts concluded that Congress did notintend 1114 to limit that right.

    On appeal, the union argues that the plainlanguage and (*5) legislative history of 1114 compel exactly the result the districtand bankruptcy courts avoided. The unionclaims that Congress intended to restrict adebtor's ability to modify or terminate, exceptthrough the 1114 process, any retireebenefits during a Chapter 11 bankruptcyproceeding, regardless of whether the debtorcould terminate those benefits outside ofbankruptcy. Based on the plain language of 1114 (as well as its legislative history), we

    agree. Accordingly, as explained more fullybelow, we will reverse the order of the districtcourt and remand for further proceedings.[fn1]

    I. Factual and Procedural History (*6)

    Visteon Corporation is one of the world'slargest suppliers of automotive parts.Originally formed as a division of Ford MotorCorporation, it spun off in 2000 to become

    its own corporate entity. In doing so, ittook over operation of plants in Connersvilleand Bedford, Indiana previously run by Fordor its wholly-owned subsidiaries. See J.A.3848. Hourly workers at both plants wererepresented by the IUE-CWA. See J.A.2218-326, 3242-392.

    For decades, Visteon, or its predecessors-in-interest, have provided certain health andlife insurance benefits to retirees from these

    plants. See, e.g, J.A. 504, 1163. Visteon'sagreement to provide such benefits hasbeen memorialized in successive collectivebargaining agreements ("CBAs"), as well asin summary plan descriptions ("SPDs").

    The most recent SPDs at both plants statethat retiree medical coverage will "continueduring retirement" or (*7) "continue[] duringretirement until . . . death." J.A. 434, 1076.However, both SPDs have language whereinVisteon retains its right to modify or terminatecoverage. The second page of each SPDprovides in part as follows:

    Visteon Systems, LLC intends to continue thePlan as described in this handbook. However,the Company reserves the right to suspend,amend or terminate the Plan or any ofthe coverages or features provided under thePlan at any time and in any ma[nn]erto the extent permitted by law (subject tothe collective bargaining requirements). As aresult, this handbook is not a contract, nor isit a guarantee of your coverages.

    J.A. 417, 1060 (with slight variations). EachSPD reiterates:

    Visteon Systems, LLC intends to continuethe Plan indefinitely. However, the Company

    reserves the right to suspend, modify oramend the benefits provided under the Plan,or even terminate the Plan or any of thebenefits provided under the Plan.

    However, the Plan is subject to the provisionsof (*8) the current Collective BargainingAgreements[fn2] between the Plan Sponsorand [the unions]. As a result, this handbook isnot a guarantee of your coverage.

    J.A. 489, 1145 (with slight variations).

    Visteon closed its Connersville plant in 2007and its Bedford plant in 2008. Prior toeach plant closing, the union and Visteonnegotiated Closing Agreements that set forththe terms under which the plants wouldclose. See J.A. 571-77, 1325-30. For themost part, these agreements do not referto retiree benefits. However, the agreementsdo include a Waiver and Release, which

    provides in relevant part: "Visteon may inthe future amend its benefit plans and makeavailable different retirement, placement orseparation benefits for which I may not beeligible. The Plant Closure Agreement doesnot limit or in any way (*9) modify theprovisions of any benefit plan." J.A. 575,1328.

    On May 28, 2009, Visteon filed a petitionfor Chapter 11 bankruptcy in the Districtof Delaware. See J.A. 12. Since filing thepetition, Visteon has continued to operate itsbusiness as a debtor in possession, and is

  • 8/8/2019 Third Circuit Opinion in Visteon Case

    3/24

    Page 3Industrial Div. of the Communications Workers of America v.

    Visteon Corp. (In re Visteon Corp.), 612 F.3d 210 (3d Cir. 2010)

    in the process of restructuring so that it cansuccessfully emerge from bankruptcy. SeeJ.A. 133.

    On June 26, 2009, Visteon moved thebankruptcy court for permission to terminateall United States retiree benefit planspursuant to 11 U.S.C. 363(b)(1).[fn3]See J.A. 50. Visteon's request affectedapproximately 8,000 of Visteon's presentand former employees, their spouses, andtheir dependants. See J.A. 106. (*10)Several groups of retirees, including the1,700 Connersville retirees and 400 Bedfordretirees represented by the IUE-CWA,objected. See J.A. 111-14, 3572. Theyargued that Visteon could not terminate

    any retiree benefits during a Chapter 11proceeding without first complying with therequirements of 1114. SeeJ.A. 350.

    On December 10, 2009, the bankruptcycourt granted Visteon's motion as to thevast majority of the retiree benefits, includingthose at issue in this appeal.[fn4] See J.A.3571. The court concluded that since Visteonhas the right under non-bankruptcy law toterminate benefits unilaterally, 1114 did not

    apply. See id. The court explained: (*11)

    [The] Court finds that as a matter of applicablenon-bankruptcy law, as well as the plainmeaning of the controlling documents, theDebtors would have outside of bankruptcy theright to terminate these plans at will. . . .

    . . . The reason that the benefits can beterminable . . . is that they are not vested. Inmaking my ruling, I incorporate in totoJudge

    Drain's analysis in [In re Delphi Corp., No.05-44481, 2009 WL 637315 (Bankr. S.D.N.Y.Mar. 10, 2009)], and I rely on that analysisas a support for my ruling. . . . I hold that theplain meaning [analysis] as applied by JudgeVenter[] in [In re Farmland Indus., Inc., 294B.R. 903 (Bankr. W.D. Mo. 2003),] . . . is notpersuasive . . . [because it] would lead to anabsurd result in that it would expand retireerights beyond the scope of state law for nolegitimate bankruptcy purpose. Under [Butnerv. United States, 440 U.S. 48, 54 (1979)],which is based on constitutional principles,the statute cannot modify existing state law

    [absent] some specific bankruptcy reasonand there is none here in connection with theissue of non-vested retiree benefits.

    J.A. 3573-74. The bankruptcy court thereforeevaluated Visteon's motion to terminateretiree benefits under 363, and authorizedthe termination based on the court'sconclusion that (*12) it was a reasonableexercise of business judgment. See J.A.3571, 3581.

    Even though Visteon could terminate itsbenefit payments immediately pursuantto the bankruptcy court's order, itremained obligated under the ConsolidatedOmnibus Budget Reconciliation Act of 1985

    ("COBRA"), 29 U.S.C. 1161-68, to providelifetime COBRA coverage to retirees whosebenefits it discontinued during a Chapter11 proceeding. Visteon consulted with itsbenefit administrators and determined that itwould take several months to terminate theold plans and set up new COBRA plans.SeeJ.A. 3688-92, 3844-45. Visteon thereforeplanned to delay termination of paymentsfor retiree benefits until April 1, 2010. SeeJ.A. 3844-45. After that date, retirees could

    continue their Visteon health coverage onlyby electing COBRA coverage, and paying thefull cost of that coverage plus a two percentadministrative fee. See, e.g., J.A. 3593. (*13)

    On February 26, 2010, the union moved thebankruptcy court for a stay pending appeal ofits order permitting the termination of benefits.See J.A. 3790-802. The bankruptcy courtdenied the motion. SeeJ.A. 3829-34. Despitefinding that some Medicare-ineligible retirees

    faced irreparable harm, [fn5] it concluded thatthe union was unlikely to succeed on themerits on appeal, and therefore it could notmeet the burden for obtaining preliminaryinjunctive relief. See id.

    The union appealed the bankruptcy court'sdecision to the district court, and also movedthat court for a stay of the bankruptcycourt's order. The district court denied theappeal, and refused to issue a stay pendingappeal. See J.A. 3.1. The district courtconcluded that the bankruptcy court's findingthat (*14) the benefits were not vested was

  • 8/8/2019 Third Circuit Opinion in Visteon Case

    4/24

    Page 4Industrial Div. of the Communications Workers of America v.

    Visteon Corp. (In re Visteon Corp.), 612 F.3d 210 (3d Cir. 2010)

    not clearly erroneous. See J.A. 3.3. It alsoagreed with the bankruptcy court's conclusionthat the protections afforded by 1114 didnot apply to retiree benefits that could beunilaterally terminated outside of bankruptcy.Although the court acknowledged that theunion's argument to the contrary might "seemlegitimate based on a plain reading of thestatute," it nonetheless reasoned that suchan interpretation would result in retireesreceiving "more protection from a companyunder bankruptcy than they would receivefrom a company outside of bankruptcy . . .a unique if not revolutionary interpretationof the Bankruptcy Code by improving onthe pre-petition, contractual rights of a thirdparty constituent as a result of the filing of a

    bankruptcy case." J.A. 3.6.

    The district court did, however, grant alimited one-month stay so that the unioncould seek expedited appeal. The (*15)court acknowledged that the union's legalargument had some merit, as "neither theSupreme Court nor any circuit court hasruled on this issue," and its contrary readingof 1114 was supported only by "theinterpretation of 1114 by several respected

    Bankruptcy Judges." J.A. 3.6-3.7. It alsonoted that "a strict application of the `plainmeaning' doctrine may warrant a freshreading of this statute," but that "such aninterpretation would still have to get over thehurdle that interpreting the statute [in thatmanner] results in the retirees getting moreprotection through a bankruptcy proceedingthan they would absent bankruptcy." J.A. 3.7;seealsoJ.A. 3932-34.

    During the one-month stay granted by thedistrict court, Visteon was permitted toprovide insurance solely through COBRAplans.[fn6] However, it was required topay the April 2010 (*16) premiums of anyMedicare-ineligible retirees who purchasedinsurance. See J.A. 1-3. This expeditedappeal followed.[fn7]

    Effective May 1, 2010, Visteon stoppedall payments for the retiree benefits atissue in this case, and the retirees wereable to continue Visteon health insuranceonly through paying for COBRA coverage.

    The union represented at oral argumentthat the majority of the approximately 840Medicare-ineligible retirees are now withouthealth insurance, as the cost of purchasingcoverage through COBRA or other privateinsurance providers is prohibitive.[fn8] (*17)

    II. Jurisdiction and Standard of Review

    The bankruptcy court had jurisdictionpursuant to 28 U.S.C. 157 and 1334.The district court had jurisdiction pursuantto 28 U.S.C. 158(a) and 1334. We havejurisdiction pursuant to 28 U.S.C. 158(d).

    Our review of the district court's decision"effectively amounts to review of the

    bankruptcy court's opinion in the firstinstance." In re Sharon Steel Corp., 871 F.2d1217, 1222 (3d Cir. 1989). We review thebankruptcy court's legal conclusions de novo.See Ferrara & Hantman v. Alvarez (In reEngel), 124 F.3d 567, 571 (3d Cir. 1997).

    III. Chapter 11 Bankruptcy and theProtections of 1114 (*18)

    As a general rule, "Chapter 11 of

    the Bankruptcy Code strikes a balancebetween two principal interests: facilitatingthe reorganization and rehabilitation of thedebtor as an economically viable entity, andprotecting creditors' interests by maximizingthe value of the bankruptcy estate." In rePhiladelphia Newspapers, LLC, 599 F.3d298, 303 (3d Cir. 2010). Section 1114,however, factors another interest into thebalancing equation. As we have explained, 1114 "was enacted to protect the interests

    of retirees of chapter 11 debtors." Gen.DataComm Indus., Inc. v. Arcara (In reGen. DataComm Indus., Inc.), 407 F.3d 616,620 (3d Cir. 2005) (quoting 7 Collier onBankruptcy, 1114.02[1] (Alan N. Resnick &Henry J. Sommereds., 15th ed. 2002)).

    Section 1114 was enacted, along with itscounterpart 1129(a)(13), as the primarysubstantive components of the RetireeBenefits Bankruptcy Protection Act of 1988(*19) ("RBBPA"), Pub.L. No. 100-334, 102Stat. 610 (1988) (codified as amended at11 U.S.C. 1114, 1129(a)(13)). Congress

  • 8/8/2019 Third Circuit Opinion in Visteon Case

    5/24

    Page 5Industrial Div. of the Communications Workers of America v.

    Visteon Corp. (In re Visteon Corp.), 612 F.3d 210 (3d Cir. 2010)

    enacted the RBBPA in response to LTVCorporation's termination of the health andlife insurance benefits of 78,000 retireesduring its 1986 Chapter 11 bankruptcy, withno advance notice to the affected retirees.[fn9] See S. Rep. No. 100-119 (1987),reprinted in 1988 U.S.C.C.A.N. 683, 683("The bill . . . (*20) addresses situations withrespect to retiree insurance benefits, suchas occurred last year when LTV Corporation,after filing a Chapter 11 Bankruptcy petition,immediately terminated the health and lifeinsurance benefits of approximately 78,000retirees.").

    In crafting 1114, Congress provided certainprocedural and substantive protections for

    retiree benefits during a Chapter 11proceeding. Section 1129(a)(13) ensures thatsome measure of those protections extendsbeyond the proceeding. For the purposes ofboth sections, "retiree benefits" are definedas:

    payments to any entity or person forthe purpose of providing or reimbursingpayments for retired employees and theirspouses and dependants, for medical,

    surgical, or hospital care benefits, or benefitsin the event of sickness, accident, disability,or death under any plan, fund, or program(through the purchase of insurance orotherwise) maintained or established in wholeor in part by the debtor prior to filing a petitioncommencing a case under this title. (*21)

    11 U.S.C. 1114(a).

    Section 1114(e) provides in relevant part

    that: "[n]otwithstanding any other provisionof this title, the [trustee[fn10] ] shall timelypay and shall not modify any retiree benefits"unless the court, on the motion of thetrustee or authorized representative of theretirees, [fn11] orders, or the trustee andthe authorized representative agree to, themodification of such benefits. 11 U.S.C. 1114(e). (*22)

    The trustee must attempt to reach anagreement with the retirees regardingmodification of retiree benefits before itcan ask the bankruptcy court to modify

    or terminate them.[fn12] Section 1114(f)requires that the trustee "make a proposalto the authorized representative of theretirees . . . which provides for thosenecessary modifications in the retireebenefits that are necessary to permit thereorganization of the debtor and assures thatall creditors, the debtor and all of the affectedparties are treated fairly and equitably." 11U.S.C. 1114(f)(1)(A). The trustee must alsoprovide the authorized representative withinformation about the company's financialsituation to allow for informed evaluation ofthe proposal. See11 U.S.C. 1114(f)(1)(B).After making this proposal, the trustee must(*23) meet with the authorized representativeto "confer in good faith in attempting to reach

    mutually satisfactory modifications of suchretiree benefits." 11 U.S.C. 1114(f)(2).

    The court will grant a motion to modifyretiree benefits only if it finds that thetrustee has made a proposal satisfying theserequirements, the authorized representativehas refused to accept it without "goodcause," and the "modification is necessaryto permit the reorganization of the debtorand assures that all creditors, the debtor,

    and all of the affected parties are treatedfairly and equitably, and is clearly favoredby the balance of the equities."[fn13] 11U.S.C. 1114(g). Even after the court(*24) permits a modification, however, theauthorized representative may still move foran increase in benefits, which the courtshould grant if consistent with the 1114(g)standard. Seeid.

    Section 1114(e) provides additional

    protection for retiree benefits by giving thempriority they would not otherwise have. Thatprovision states: "[a]ny payment for retireebenefits required to be made" during aChapter 11 proceeding "has the status ofan allowed administrative expense" under11 U.S.C. 503, rather than the generalunsecured status that would otherwise apply.11 U.S.C. 1114(e)(2). Benefits paid duringthe proceeding do not reduce the retirees'general unsecured claim "for any benefitswhich remain unpaid . . . [whether] basedupon . . . a right to future unpaid benefitsor from any benefits not paid as a result of

  • 8/8/2019 Third Circuit Opinion in Visteon Case

    6/24

    Page 6Industrial Div. of the Communications Workers of America v.

    Visteon Corp. (In re Visteon Corp.), 612 F.3d 210 (3d Cir. 2010)

    modifications allowed pursuant (*25) to thissection." 11 U.S.C. 1114(i).

    Congress focused the protections of 1114on retirees who would otherwise be withoutneeded benefits. Thus, Congress specifiedthat 1114 does not apply to "any retiree,or the spouse or dependents of such retiree,if such retiree's gross income for the twelvemonths preceding the filing of the bankruptcypetition equals or exceeds $250,000," unlessthat retiree is able to show that s/he cannototherwise obtain comparable coverage. 11U.S.C. 1114(m).

    As already noted, the RBBPA also amended 1129(a), the section of Chapter 11 which

    sets forth the requirements a reorganizationplan must satisfy in order for the bankruptcycourt to approve the reorganization and allowthe debtor to emerge from bankruptcy. TheRBBPA added the requirement that:

    The plan provides for the continuation after its(*26) effective date of payment of all retireebenefits, as that term is defined in section1114 of this title, at the level establishedpursuant to subsection (e)(1)(B) or (g) of

    section 1114 of this title, at any time prior toconfirmation of the plan, for the duration ofthe period the debtor has obligated itself toprovide such benefits.

    11 U.S.C. 1129(a)(13).

    IV. Discussion

    As explained at the outset, this appealrequires that we decide whether 1114

    limits a debtor's ability to terminate duringbankruptcy those retiree benefits that it could,consistent with plan documents, collectivebargaining obligations, and the prescriptionsof the Employee Retirement Income SecurityAct of 1974 ("ERISA"), 29 U.S.C. 1001-461, terminate unilaterally outside ofbankruptcy.[fn14] The union argues that the(*27) plain language of 1114 appliesto all retiree benefits, whether or not thedebtor could terminate those benefits outsideof bankruptcy pursuant to language inthe applicable plan documents reservingthat right. Appellees Visteon and the

    Official Committee of Unsecured Creditors("Unsecured Creditors") counter by relyingprimarily on the majority view of courtsthat have addressed this issue. Like thecourts in those cases, Appellees contend thatrestricting a debtor from terminating duringbankruptcy those retiree benefits that it couldotherwise terminate at will is absurd, andcourts must conclude that the plain languageof a statute does not reflect congressional(*28) intent if it produces an absurd result.

    We hold that 1114 is unambiguous andclearly applies to any and all retiree benefits,including the ones at issue here. Moreover,despite arguments to the contrary, the plainlanguage of 1114 produces a result which

    is neither at odds with legislative intent, norabsurd. Accordingly, disregarding the text ofthat statute is tantamount to a judicial repealof the very protections Congress intendedto afford in these circumstances. We must,therefore, give effect to the statute as written.SeeLamie v. United States Tr., 540 U.S. 526,534 (2004) ("[W]hen the statute's language isplain, the sole function of the courts at leastwhere the disposition required by the test isnot absurd is to enforce it according to its

    terms.") (internal quotation marks omitted).

    We recognize that the majority of bankruptcyand district courts that have addressed thisissue have concluded that 1114 (*29) doesnot limit a debtor's ability to terminate benefitsduring bankruptcy when it has reservedthe right to do so in the applicable plandocuments. See, e.g., Retired W. UnionEmployees Ass'n v. New Valley Corp. (Inre New Valley Corp.), No. 92-4884, 1993

    WL 818245 (D. N.J. Jan. 28, 1993); In reDelphiCorp., No. 05-44481, 2009 WL 637315(Bankr. S.D.N.Y. Mar. 10, 2009); In re N. Am.Royalties, Inc., 276 B.R. 860 (Bankr. E.D.Tenn. 2002); In re Doskocil Cos., 130 B.R.870 (Bankr. D. Kan. 1991). But see RetailersServ. Corp. v. Employees' Comm. of Ames

    Dep't Store, Inc. (In re Ames Dep't Stores,Inc.), Nos. 92 Civ. 6145-46, 1992 WL 373492(S.D.N.Y. Nov. 30, 1992); In re FarmlandIndus., Inc., 294 B.R. 903 (Bankr. W.D. Mo.2003).

  • 8/8/2019 Third Circuit Opinion in Visteon Case

    7/24

    Page 7Industrial Div. of the Communications Workers of America v.

    Visteon Corp. (In re Visteon Corp.), 612 F.3d 210 (3d Cir. 2010)

    We also realize that our conclusion appearsto be in tension with the decision of the Courtof Appeals for the Second Circuit in LTVSteel Co. v. United Mine Workers(In re(*30)Chateaugay Corp.), 945 F.2d 1205 (2d Cir.1991). There, the court was confronted withthe related, but different, issue of 1114'sapplicability to benefits provided pursuant toa CBA that expires while the debtor is inChapter 11 proceedings.

    We are convinced that in reaching thesecontrary conclusions as to the scope of 1114, these courts mistakenly relied on theirown views about sensible policy, rather thanon the congressional policy choice reflectedin the unambiguous language of the statute.

    A. Plain Language

    As in all cases of statutory construction,our analysis of 1114 begins with thestatute's plain language. See, e.g., HourlyEmployees/Retirees of Debtor v. ErieForge& Steel, Inc. (In re Erie Forge & Steel), 418F.3d 270, 276 (3d Cir. 2005) (construing"authorized representative" provision of 1114 in accordance with its plain language).

    The words of a statute are (*31) not tobe lightly jettisoned by courts looking toimpose their own logic on a statutory scheme.See United States v. Terlingo, 327 F.3d216, 221 (3d Cir. 2003) (Courts may lookbehind a statute only when the plain meaningproduces "a result that is not just unwisebut is clearly absurd.") (internal quotationmarks omitted). When statutory language isplain and unambiguous, "the sole function ofthe courts . . . is to enforce it according to

    its terms." Lamie, 540 U.S. at 534 (internalquotation marks omitted). "[C]ourts mustpresume that a legislature says in a statutewhat it means and means in a statute what itsays there." Conn. Nat'lBank v. Germain, 503U.S. 249, 253-54 (1992). It is for Congress,not the courts, to enact legislation. Whencourts disregard the language Congress hasused in an unambiguous statute, they amendor repeal that which Congress enacted intolaw. Such a failure to defer to the clearlyexpressed statutory language of Congressruns contrary to the bedrock principles of(*32) our democratic society. See Lamie, 540

    U.S. at 538 ("Our unwillingness to softenthe import of Congress' chosen words . . .results from `deference to the supremacy ofthe Legislature.'") (quoting United States v.Locke, 471 U.S. 84, 95 (1985)).

    As discussed above, 1114(e)(1) plainlystates: "[n]otwithstanding any other provisionof this title, the [trustee] shall timely pay andshall not modify any retiree benefits," exceptthrough compliance with the proceduresset forth therein. 11 U.S.C. 1114(e)(1)(emphasis added). "Retiree benefits" aredefined, in turn, as "payments to any entityor personfor [certain select purposes] underany plan, fund, or program . . . maintainedor established in whole or in part by the

    debtor prior to filing a petition commencinga case under this title." 11 U.S.C. 1114(a)(emphasis added). With the exception ofsubsection (m), which specifies that 1114does not apply to (*33) high-income retireesable to obtain comparable benefits, 1114contains no limitation or restriction.

    Section 1114 could hardly be clearer. Itrestricts a debtor's ability to modify anypayments to anyentity or person under any

    plan, fund, or program in existence when thedebtor files for Chapter 11 bankruptcy, and itdoes so notwithstanding any other provisionof the bankruptcy code. There is thereforeno ambiguity as to whether 1114 applieshere. Congress did not restrict the applicationof 1114 to those benefits that the debtorwas otherwise compelled to provide. Benefitsthat the debtor couldhave terminated outsideof bankruptcy, but which it was nonethelessproviding at the time of its Chapter 11 filing,

    are plainly included in the phrase, "paymentsto any entity or person . . . under any plan,fund, or program."

    Congress took care to specifically excludesome benefits from the protective umbrellaof 1114. The protections (*34) establishedtherein do not extend to benefits providedfor purposes other than health, accident,disability, or death; or to benefits providedto high-income retirees able to obtaincomparable coverage; or to benefitscontemplated, but not maintained orestablished, prior to the debtor's filing for

  • 8/8/2019 Third Circuit Opinion in Visteon Case

    8/24

    Page 8Industrial Div. of the Communications Workers of America v.

    Visteon Corp. (In re Visteon Corp.), 612 F.3d 210 (3d Cir. 2010)

    bankruptcy. However, Congress did not limit 1114's otherwise broad scope based onwhether or not the debtor reserved a rightto terminate in its plan. See In reFarmlandIndus., Inc., 294 B.R. at 916-17 ("On its face,the language of the statute is clear. . . .There is nothing in the language of the statuteto suggest that Congress intended to allowthe termination of retiree benefits in thoseinstances where the debtor has the right tounilaterally terminate those benefits under thelanguage of the plan or program at issue.").

    Nevertheless, the Unsecured Creditors arguethat 1114 is ambiguous because it does notspecifically address whether (*35) benefitswhich could be unilaterally terminated

    outside of bankruptcy are "retiree benefits."However, that is not an ambiguity. Languageis ambiguous only if it is "reasonablysusceptible of different interpretations."Dobrek v. Phelan, 419 F.3d 259, 264 (3dCir. 2005) (internal quotation marks omitted).It is impossible to read the plain languageof 1114 as excluding benefits which areterminable outside of bankruptcy because,as we have explained, they are plainly"payments to any entity or person . . . under

    any plan, fund, or program."

    Furthermore, a statute is not ambiguoussimply because it is broad. "In employingintentionally broad language, Congressavoids the necessity of spelling out inadvance every contingency to which a statutecould apply." In re Philadelphia Newspapers,599 F.3d at 310. By using the word "any"three separate times, Congress ensured thatthe statute would apply to all benefits, absent

    the few exceptions directly addressed, (*36)without its having to itemize that entireuniverse of benefits. We are, therefore,unpersuaded by the suggestion that failureto specifically address benefits that could beunilaterally terminated outside of bankruptcysomehow breathes ambiguity into the word"any." The breadth of the statute's languagerequires that it be universally applied absentthe few exceptions included in the text; it doesnot create a license to disregard the statute'splain language.

    Visteon relies upon In re Chateaugay Corp.in arguing that the phrase "under any plan,fund, or program" makes 1114 ambiguousin these circumstances, because it compels judicial consideration of the plan underwhich benefits are provided. Otherwise,according to Visteon, it would be impossibleto determine which benefits, if any, aredue. The court in Chateaugayaddressed thedistinct but related issue of (*37) whetherthe RBBPA's interim measure[fn15] requireda debtor to continue paying retiree benefitsduring bankruptcy even after expiration of theapplicable CBA. The court concluded that thedebtor was free to terminate benefits withoutcomplying with 1114. It reasoned:

    The Act expressly states that the trustee inbankruptcy . . . must continue to "pay benefitsto retired former employees under a plan,fund, or program maintained or establishedby the debtor prior to filing a petition[for bankruptcy]." Thus, we must analyzethe "plan, fund, or program maintained orestablished" by LTV before it filed (*38) forbankruptcy in order to determine the trustee'sobligation to LTV's retired former employees.

    945 F.2d at 1207. Since the debtor therewas not obligated to continue paying benefitsupon expiration of the CBA, the courtreasoned that no further payments werenecessary.

    However, as the dissent in Chateaugaypointed out, the Second Circuit majority'sanalysis failed to remain faithful to theplain language of the provision the courtwas interpreting. The majority concluded

    that the statute only mandated continuationof payments the debtor was required tomake under a plan, as opposed to simplypayments being made under a plan. Thisis not what the statute said. Congress didnot use the word "required," nor did ituse the word "obligations." Rather, as wehave explained, Congress mandated thatthe debtor continue to pay benefits "undera plan, fund, or program maintained orestablished by the debtor prior to filing a (*39)petition." The expiration of the agreementto provide benefits did not alter the factthat those benefits were provided "under"

  • 8/8/2019 Third Circuit Opinion in Visteon Case

    9/24

    Page 9Industrial Div. of the Communications Workers of America v.

    Visteon Corp. (In re Visteon Corp.), 612 F.3d 210 (3d Cir. 2010)

    a plan that was in effect when the petitionwas filed. Interpreting this language in lightof the legislative history, the Chateaugaydissent concluded that the measure requiredcontinuation of "allretiree health benefits . . .in effect immediately prior to bankruptcy,"including those retiree benefits providedpursuant to a CBA that expires during thecourse of the bankruptcy proceeding. 945F.2d at 1213.

    To the extent that Chateaugay is relevant toour analysis, we find Judge Restani's cogentand well-reasoned dissent more persuasive,and far more faithful to the statutory text thanthe analysis of that court's majority. However,the issue before the court in Chateaugay

    differed from the one before us, and whateverthe merits of Visteon's argument in thatcontext, it (*40) plainly fails here.[fn16]

    Given the importance of the text, it is worthreiterating that 1114(e)(1) requires thata trustee "shall timely pay and shall notmodify any retiree benefits." 11 U.S.C. 1114(e)(1). "Retiree benefits" are defined as"payments to any entity or person . . . underany plan, fund, or program . . . maintained

    or established in whole or in part by thedebtor prior to filing a petition." 11 U.S.C. 1114(a). Payments made during bankruptcyunder a plan that is terminable at will areunambiguously "retiree benefits" under thisdefinition. The fact that the debtor could haveunilaterally stopped the payments had (*41) itnot been in Chapter 11 is therefore irrelevant.Once a bankruptcy petition is filed, 1114(e)takes effect, and the trustee must "timelypay and . . . not modify any retiree benefits"

    except through the 1114 procedure.[fn17]Benefit payments pursuant to a terminableat will plan in effect when the petition isfiled thus continue to be for the pendencyof the proceeding "under any plan, fund, orprogram."

    It is also argued that 1114 becomesambiguous when read in conjunction withits counterpart 1129(a)(13). As we havenoted, the latter provision was also enactedas part of the RBBPA. It is a "cardinal rule"of statutory interpretation that "a (*42) statuteis to be read as a whole." Leckey v. Stefano,

    501 F.3d 212, 220 (3d Cir. 2007) (internalquotation marks omitted). Reading 1114in conjunction with 1129(a)(13), however,merely reinforces our conclusion that 1114limits Visteon's ability to modify or terminateanyretiree benefits.

    Section 1129(a)(13) specifies that in orderto emerge from bankruptcy, the debtor'sreorganization plan must provide for:

    the continuation after its effective date ofpayment of all retiree benefits, as that termis defined in section 1114 of this title, at thelevel established pursuant to subsection (e)(1)(B) or (g) of section 1114 of this title, atany time prior to confirmation of the plan,

    for the duration of the period the debtor hasobligated itself to provide such benefits.

    11 U.S.C. 1129(a)(13). Ambiguity ispurportedly ushered in through the phrase,"for the duration of the period the debtorhas obligated itself to provide such benefits."As we have (*43) explained, 1114contains no limitation based on the debtor'sobligation to provide benefits, yet 1129(a)(13) clearly does. Courts, assuming that

    Congress intended the two provisions to beidentical in scope, have accordingly foundambiguity when considering them together. InIn re New Valley Corp., for example, the courtacknowledged that "the language of section1114, particularly the phrase `any retireebenefits' appears to embrace all retireebenefit plans in its modification procedures."1993 WL 818245, at *4. However, because itread 1129(a)(13) as "appear[ing] to limit theapplication of section 1114 to retiree benefits

    which the debtor has `obligated itself' topay, presumably pursuant to prior contractualagreement," id., the court concluded that the"statutory scheme [was] not clear," id., at *3.It looked beyond the plain language of thestatute to ascertain the meaning of 1114.

    The union advocates a quite differentinterpretation of 1129(a)(13), (*44) which itcontends avoids creating ambiguity in 1114.It posits that the clause, "for the durationof the period the debtor has obligated itselfto provide such benefits," refers solely tothose obligations that a debtor takes on

  • 8/8/2019 Third Circuit Opinion in Visteon Case

    10/24

    Page 10Industrial Div. of the Communications Workers of America v.

    Visteon Corp. (In re Visteon Corp.), 612 F.3d 210 (3d Cir. 2010)

    during the 1114 process, and not to anyextra-bankruptcy obligations. According tothe union, 1129(a)(13):

    does not come into play until the 1114process has been completed and a Chapter11 debtor has obligated itself to continueretiree benefits for some period of time in thecourse of a 1114 process. Section 1129[(a)](13) merely ensures that retirees who exit the 1114 process having secured a promisefrom the debtor that their retiree benefits willcontinue for a period of time do in fact receivethe benefit of their bargain in the Chapter 11Plan upon its confirmation.

    Appellant's Br. 31-32.

    Although we agree that 1129(a)(13)does not create ambiguity in the statutoryscheme, we are not persuaded by theunion's interpretation of the provision for tworeasons. First, the (*45) syntax of the sectionis inconsistent with the union's argumentthat 1129(a)(13) obligations arise solelyfrom 1114. Section 1129(a)(13) requiresthe continuation of the payment of retireebenefits, "at the level established [through the

    1114 process], for the duration of the periodthe debtor has obligated itself to providesuch benefits." 11 U.S.C. 1129(a)(13). Thecontinuation of payments is accordingly to bein accordance with two separate clauses. Thefirst, "at the level established [through the 1114 process]" clearly states that the level ofbenefits is the level agreed upon, or orderedby the court, pursuant to 1114. The second,"for the duration of the period the debtorhas obligated itself to provide such benefits,"

    contains no such reference to 1114. HadCongress intended to refer to a "duration" or"obligation" arising from the 1114 process,it would have said so. It would have requiredthe continuation of retiree benefits "at thelevel, and for the duration, established" (*46)pursuant to 1114.

    Secondly, the union's reading is incompatiblewith how 1114 operates in practice. Section1114 permits modification of retiree benefitseither by agreement between the debtorand the authorized representative, or, ifagreement cannot be reached, through court

    order. In those instances in which agreementis reached, any duration agreed upon couldbe described as "the duration of the periodthe debtor has obligated itself to providesuch benefits." However, where the courthas orderedmodification, it makes no senseto refer to the court-ordered duration assomething to which the debtor has "obligateditself."

    We think "the duration of the period thedebtor has obligated itself to provide suchbenefits" plainly encompasses anydurationalobligations, including those arising outsideof the bankruptcy context. Of course, suchobligations could be (*47) modified byagreement during the 1114 process. Cf.

    In re N. Am. Royalties, Inc., 276 B.R. at867 ("Section 1129(a)(13) requires the planto provide for continued payment of retireebenefits according to the pre-chapter 11contract or the modifications made under 1114."). However, the 1114 process maynot yield agreement on durational obligations,either because no agreement is reached at alland modification is court-ordered, or becausethe agreement reached addresses only levelof benefits and not duration. In such cases,

    the sole source of durational obligations isthe underlying contractual agreements, andif the debtor has no obligations under thoseagreements, as is the case here, 1129(a)(13) does not require continuation of benefitpayments upon the debtor's emergence frombankruptcy.

    Contrary to the court's reasoning in In re NewValleyCorp., however, we do not believe thatCongress intended the (*48) plain language

    of 1129(a)(13) to limit the reach or operationof 1114. Rather, the difference in the plainlanguage of these two provisions compels theopposite conclusion.

    A "fundamental canon of statutoryconstruction" is that where a section of astatute does not include a specific term orphrase used elsewhere in the statute, "thedrafters did not wish such a requirement toapply." United States v. Mobley, 956 F.2d450, 452-53 (3d Cir. 1992); see also BFPv. Resolution Trust Corp., 511 U.S. 531,537 (1994) ("[I]t is generally presumed that

  • 8/8/2019 Third Circuit Opinion in Visteon Case

    11/24

    Page 11Industrial Div. of the Communications Workers of America v.

    Visteon Corp. (In re Visteon Corp.), 612 F.3d 210 (3d Cir. 2010)

    Congress acts intentionally and purposefullywhen it includes particular language in onesection of a statute but omits it in another.")(alteration in original) (internal quotationmarks omitted). By including "for the durationof the period the debtor has obligated itselfto provide such benefits" in 1129(a)(13),Congress requires debtors emerging frombankruptcy to continue to provide benefitsonly if they are otherwise obligated (*49)to. So long as they do not take on newdurational obligations during the 1114process, debtors emerge from Chapter 11 asfree to terminate benefits as they would havebeen had they never entered Chapter 11.

    In sharp contrast, 1114 requires the

    continuation of all retiree benefits withoutlimitation to "the period the debtor hasobligated itself to provide such benefits."We must assume that this omission waspurposeful. As Professor Susan Stabileexplains in her thorough discussion of 1114, "when Congress wanted to limit acompany's responsibility for retiree benefits,it explicitly did so. . . . The omission of[ 1129(a)(13)'s] explicit language in section1114's provisions . . . indicates that Congress

    did not implicitly intend to adopt the samecontractual, durational limit in that context.'"Susan Stabile, Protecting Retiree MedicalBenefits in Bankruptcy:The Scope of Section1114 of the Bankruptcy Code, 14 CardozoL. Rev. 1911, 1932 (*50) (1993) [hereinafter"The Scope of Section 1114"]. Therefore,during the limited period of the bankruptcyproceeding, we conclude that Congressintended to do exactly what it said, requirethe debtor to continue and not modify any

    retiree benefits, even if it would not otherwisebe obligated to continue them.[fn18]

    In interpreting this scheme, we alsocannot ignore the substantial change indebtors' rights enacted in 2005 through theamendment of 1114 to include subsection(l). See Bankruptcy Abuse Prevention andConsumer Protection Act of 2005, Pub.L. No.109-8, 119 Stat. 23 (2005) (codified at 11U.S.C. 1114(l)). Subsection (l) provides:(*51)

    [i]f the debtor, during the 180-day periodending on the date of the filing of the petition (1) modified retiree benefits; and (2) wasinsolvent on the date such benefits weremodified; the court . . . shall issue an orderreinstating as of the date the modification wasmade, such benefits as in effect immediatelybefore such date unless the court finds thatthe balance of the equities clearly favors suchmodification.

    11 U.S.C. 1114(l).

    Subsection (l) prevents an insolvent debtorfrom terminating retiree benefits in the six-month period beforefiling for bankruptcy. Likethe rest of 1114, this subsection contains

    no limitation based on whether the debtorhas obligated itself to continue providingthese benefits. Additionally, though, 1114(l)would be virtually meaningless if it did notapply to those benefits the debtor couldunilaterally terminate or modify. Outside ofthe bankruptcy context, an employer isalready prohibited by various laws, includingERISA, the Labor-Management Relations Actof 1947, codified in various sections (*52) of29 U.S.C., and basic principles of contract

    law, from modifying those benefits it isobligated to provide. Subsection (l) thereforehas meaning only if it adds something new,namely, the protection of benefits a would-bedebtor could otherwise terminate at will.

    Subsection (l) therefore provides additionalevidence of the coherence of the statutoryscheme Congress has created here. Manyof the cases relied on by Appelleesto support their contention that 1114

    cannot apply to terminable at will benefitswere decided before this 2005 amendment,and therefore the courts issuing themdid not have the benefit of this addedevidence of congressional intent. Althoughwe think that the language of 1114was always unambiguous, this subsectioncertainly reinforces our view of the text. See7 Collier on Bankruptcy 1114.03[2] (AlanN. Resnick & Henry J. Sommereds., 16th ed.2009) ("[L]ending some support to [the (*53)minority] view [that 1114 applies to benefitswhich are terminable at will], is the 2005addition of new subsection (l) to section 1114

  • 8/8/2019 Third Circuit Opinion in Visteon Case

    12/24

    Page 12Industrial Div. of the Communications Workers of America v.

    Visteon Corp. (In re Visteon Corp.), 612 F.3d 210 (3d Cir. 2010)

    limiting a company's ability to `modify' retireebenefits during the 180-day period prior to thefiling of the bankruptcy petition.").

    We realize, as Visteon correctly argues, thatthe bankruptcy court for the Southern Districtof New York in In re Delphi Corp. recentlyconsidered and rejected the argument thatthe 2005 amendment of 1114 underminesthe majority view that the provision doesnot apply if benefits are terminable at will.However, the reasoning in In re DelphiCorp.is unpersuasive because the court's analysisis not faithful to the plain language rule that itpurports to, and must, apply.

    Although the Delphi court stated that "[t]he

    starting point for [this] analysis is thelanguage of the statute," the court didnot actually begin its analysis with thestatutory text. Inre(*54) Delphi Corp., 2009WL 637315, at *2. Instead, it immediatelyturned to case law and to a considerationof "fundamental principles underlying theBankruptcy Code." Id. Based on thoseprinciples, it concluded that "the provision'slanguage does not compel the interpretation"that 1114 applies to those benefits which

    could be terminated unilaterally outside ofthe bankruptcy context. Id. Later, the courtaddressed subsection (l). It stated:

    Section 1114(l) . . . does not specificallydeal with the issue of plans modifiable asof right and could conceivably apply to pre-bankruptcy breaches by debtors in financialdistress of vested rights. More importantly,even if it does also apply to modifiableplans, I do not view Section 1114(l), which

    applies to a specific type of prepetitionaction, as overruling Doskocil and the lineof cases that follow it, which apply topostpetition actions, nor does there appearto me to be any legislative history or otherpolicy statement . . . that would clearly setforth Congress' intention generally in Section1114(l) to override, beyond its specific terms,the fundamental principle that bankruptcydoes not give new rights to individual (*55)parties in interest. . . .

    Id., at * 6.

    This analysis exemplifies a fundamental flawof many of the cases which have failedto afford 1114 its plain meaning. Ratherthan beginning with the language of 1114(a) or (e), and the language of therelated provisions of 1114(l) or 1129(a)(13), the Delphi court began with its ownassumptions of why 1114 could not prohibita debtor from doing in bankruptcy what itcould do outside of bankruptcy. It then foundstatutory language, such as subsection (l),insufficiently persuasive to alter its view ofwhat would be an appropriate result underChapter 11. Statutory interpretation "shouldbe made of sterner stuff" than that. Thelanguage Congress chose when crafting astatute must be considered first and foremost,

    and if plain and unambiguous, it must becredited, except in "rare and exceptionalcircumstances." Rubin v. United States, (*56)449 U.S. 424, 430 (1981) (internal quotationmarks omitted).

    Appellees argue that this is such a rare andexceptional circumstance. "We do not lookpast the plain meaning unless it producesa result demonstrably at odds with theintentions of its drafters . . . or an outcome

    so bizarre that Congress could not haveintended it." Mitchell v. Horn, 318 F.3d 523,535 (3d Cir. 2003) (internal quotation marksand citations omitted). Appellees argue bothlegislative history and absurdity. We findneither a convincing reason to disregard theplain language of the statute.

    B. Legislative History

    Appellees argue that the RBBPA's legislative

    history is inconsistent with our interpretationof 1114. They rely on certain legislators'statements that 1114 would prevent debtorsfrom reneging on their "promises" or their"legal and contractual obligations." SeeVisteon's Br. 27 (listing examples of such(*57) statements). Seizing on these snippetsof legislative history, Appellees contend thatCongress did not intend 1114 to apply inthe absence of such promises or obligations.The majority in Chateaugay focused onthese same statements to buttress theirconclusion that 1114 did not apply followingexpiration of the CBA requiring payment.

  • 8/8/2019 Third Circuit Opinion in Visteon Case

    13/24

    Page 13Industrial Div. of the Communications Workers of America v.

    Visteon Corp. (In re Visteon Corp.), 612 F.3d 210 (3d Cir. 2010)

    See Chateaugay, 945 F.2d at 1210 ("Asnumerous legislators noted, the Act wascreated to `insure that promises made toemployees during their working years arenot broken during their retirement years.'")(quoting 133 Cong. Rec. H1257 (daily ed.Mar. 11, 1987) (statement by Rep. Frost)).

    "[O]nly the most extraordinary showing ofcontrary intentions in the legislative historywill justify a departure" from the unambiguousplain language of a statute. United States v.Albertini, 472 U.S. 675, 680 (1985) (alterationin original) (internal quotation marks omitted).The statements cited by (*58) Visteon fallwoefully short of such an "extraordinaryshowing of contrary intentions." Id. It is

    uncontested that 1114 applies to benefitsthat a debtor is legally or contractuallyobligated to provide. Therefore, it is notthe least bit surprising that the legislativehistory reflects concerns about a debtor'slegal and contractual obligations. This doesnot advance our inquiry very far. We mustdetermine if 1114 applies only to suchbenefits, despite plain language to thecontrary. Neither Visteon nor the UnsecuredCreditors are able to point to a single

    statement anywhere in the legislative historysuggesting that the safeguards of 1114 aretriggered only in those instances where thedebtor is legally or contractually obligated toprovide benefits.[fn19] (*59)

    In fact, the legislative history containsnumerous references to a much broadercongressional concern. No doubt becausethey were reacting to LTV's terminationof benefits, (*60) legislators discussed the

    "legitimate expectations" of retirees, and thenecessity in a "just society" of giving effectto those expectations whenever possible.Representative Fish stated: "[t]hese retireebenefits, in my judgment, should receivespecial Bankruptcy Code protection becausea just society has an interest in tryingto effectuate the legitimate expectationsof former workers and vulnerableretirees may suffer enormously from benefitterminations." 134 Cong. Rec. H3486-02(daily ed. May 23, 1988) (statement ofRep. Fish) (emphasis added). Similarly,Representative Feighan said:

    Under current law, retirees of bankruptcorporations often find their legitimateexpectations of long-term health and life

    insurance coverageshattered by the verycompany for whom they worked all their lives.Those who build a company deserve better.They have earned the right to be treated fairly

    and compassionately. . . . [This bill] wouldclarify the Bankruptcy Code to end the currentunfairness.

    Id. (statement of Rep. Feighan) (emphasisadded). (*61)

    Moreover, we do not believe that thoselegislators who spoke of "legitimate"

    expectations were referring only to vestedbenefits or benefits provided under anunexpired CBA. As Representative Edwardsexplained, Congress thought it "imperativethat [it] protect the retirees from the suddenand unilateral termination of their health,life, and disability benefits . . . [because][r]etirees who have devoted their workinglives to the betterment of their employers'businesses deserve payment of their retireehealth benefits to thefullest extent possible in

    a reorganization."[fn20] Id. (statement of Rep.Edwards) (emphasis added). (*62)

    We also think the statements of SenatorMetzenbaum, the Senate sponsor of theRBBPA, merit serious attention. In discussingthe scope of the legislation, he describeda legislative intent directly at odds withthe majority's construction of the statute inChateaugay. Senator Metzenbaum explainedthat the bill "requires a company to continue

    paying for these [retiree] benefits even afterthe termination of a collective bargainingagreement. Only if a company can prove amodification is absolutely necessary and thatit treats everyone fairly can a court, aftera hearing, order any modification." RetireeBenefits Security Act of 1987: Hearings onS. 548 Before the Subcomm. onCourts andAdministrative Practice of the S. Comm. on

    the Judiciary, 100th Cong., 1st Sess. 14(1987) [hereinafter "1987 Senate Hearings"](statement of Sen. Metzenbaum) (emphasisadded). Senator Metzenbaum also explainedthe policy concerns underlying the legislation:

  • 8/8/2019 Third Circuit Opinion in Visteon Case

    14/24

    Page 14Industrial Div. of the Communications Workers of America v.

    Visteon Corp. (In re Visteon Corp.), 612 F.3d 210 (3d Cir. 2010)

    "Bankruptcies are painful (*63) for workers,communities, small business suppliers andothers. But the burden of turning a companyaround should not rest on the backs ofretirees. They deserve a fair shake fromthe companies they build and from thelaw governing the reorganization process."134 Cong. Rec. S6823-02 (daily ed. May26, 1988) (statement of Sen. Metzenbaum)(emphasis added). All of these remarksspeak of a far broader legislative intent thanAppellees would have us believe.[fn21] (*64)

    Appellees' argument also ignores additionalpieces of legislative history that specificallyaddress the scope of 1114. The Reportdrafted to accompany the Senate version

    of the bill, a more authoritative pieceof legislative history than statements ofindividual legislators, explains:

    Section 1114 makes it clear that when aChapter 11 petition is filed retiree benefitpayments must be continued without changeuntil andunlessa modification is agreed to bythe parties or ordered by the court. Section1114(e)(1) rejects any otherbasisfor trusteesto cease or modify retiree benefit payments.

    S. Rep. No. 100-119, 1988 U.S.C.C.A.N.at 687 (emphasis added). That Report,like the section it references, could hardly(*65) be more clear. Once a Chapter 11petition is filed, there is only one way toterminate or modify retiree benefits whilethe debtor remains in Chapter 11, andthat is through the procedure establishedin 1114. Again, the fact that thedebtor could terminate those same benefits

    outside of bankruptcy is irrelevant. Seealso 134 Cong. Rec. S6823-02 (daily ed.May 26, 1988) (statement of Sen. Heflin)("Companies cannot unilaterally terminatebenefits for retirees when the companyfiles Chapter 11. Rather, this bill makesit clear that when a Chapter 11 petitionis filed, retiree benefit payments must becontinued without change, until or unlessa modification is agreed to by the partiesor ordered by the court."); Id. (statementof Sen. Metzenbaum) ("[T]his measuremakes absolutely clear that reorganizing

    companies may never unilaterally cut offretiree insurance benefits.").

    Our analysis of legislative history would beincomplete (*66) without further discussion ofthe underlying events that moved Congressto enact the RBBPA. See Elliot Coal MiningCo. v. Officeof Workers' Comp. Programs,17 F.3d 616, 631 (3d Cir. 1994) (A courtshould "look to the `mischief and defect' thatthe statute was intended to cure.") (quotingHeydon's Case, 76 Eng. Rep. 637 (Ex.1584)).

    Here, there is no question that Congressenacted the RBBPA to respond to the harm(and outrage) following LTV Corporation's

    termination of the benefits of 78,000 retireeswithout notice during its 1986 bankruptcy. Asone legislator explained:

    [t]he vulnerability of retiree benefits wasexposed when LTV unilaterally terminatedthe health and life insurance benefits oftens of thousands of retirees across thecountry. Public outrage followed causing LTVto restore the benefits, but the ensuing fearand mistrust made it obvious that a legislative

    response was necessary. Congress neededto ensure workers that a unilateral terminationwould never occur again. (*67)

    134 Cong. Rec. E1672-02 (daily ed. May 24,1988) (statement by Rep. Oakar).

    In attempting to craft an appropriatelegislative response to LTV's bankruptcy,Congress heard testimony about the effectof LTV's bankruptcy on its retirees, see

    generally LTV Bankruptcy: Hearing beforethe S. Comm. on the Judiciary, 99thCong., 2d Sess. (1986) [hereinafter "LTVBankruptcy"], as well as about the broadercauses of retiree benefit insecurity, seegenerally Fair-Weather Promise. Congresswas aware that among the retirees affectedby LTV's actions "were persons whoreceived their insurance benefits pursuant tocollective bargaining agreements, and thosewho received those benefits pursuant tonon-collectively bargained plans." S. Rep.No. 100-119, 1988 U.S.C.C.A.N. at 683.Congress accordingly was fully committed

  • 8/8/2019 Third Circuit Opinion in Visteon Case

    15/24

    Page 15Industrial Div. of the Communications Workers of America v.

    Visteon Corp. (In re Visteon Corp.), 612 F.3d 210 (3d Cir. 2010)

    to ensuring that both union and non-unionemployees would be equally protected by theRBBPA. See, e.g., 134 Cong. Rec. 12,698(*68) (statement of Sen. Metzenbaum) ("Theprovisions of [the RBBPA] apply to unionand nonunion retirees."); LTVBankruptcyat52 (statement of Sen. Metzenbaum) ("[W]ewill make every effort at the legislativelevel to protect the rights of the salariedemployees just as we will make an effortto protect the rights of the employees whohave the collective bargaining agreement.").Importantly, Congress also heard testimonythat since retiree benefits were increasingly"unvested," see Fair-WeatherPromiseat 24,43, 78, soon the only benefits employerswould not be able to unilaterally terminate

    outside of bankruptcy were those coveredby a current contractual agreement, suchas a CBA, id. at 53-54. Congress wastherefore aware that debtors would almostalways have an extra-bankruptcy right tounilaterally terminate the benefits of non-union employees.

    If we were to credit Appellees' interpretationof 1114 and remove from its protectionsthose benefits that could be (*69) unilaterally

    terminated outside of bankruptcy, theprovision would almost never protect non-union employees. As Congress knew, "[a]nydebtor most debtors, more than likely would be able to point to language . . .giving them the right to unilaterally terminatethe programs." In re Farmland Indus.,Inc., 294 B.R. at 917. Appellees' readingtherefore "eviscerate[s]" the statute, making it"essentially only apply to collective bargainingagreements or other bargained-for programs,

    and the legislative history makes it clear thatsuch limitations were not intended." Id.

    Appellees also cite to subsequent legislativehistory in support of their argument that 1114 does not apply to benefits that could beunilaterally terminated outside of bankruptcy.In 2007, bills were introduced in both housesof Congress which would have added aclause stating that 1114's protections apply"whether or not the debtor asserts a rightto unilaterally (*70) modify such paymentsunder such plan, fund, or program." H.R.3652, 110th Cong. 9 (2007); see also

    S. 2092, 110th Cong. 9 (2007). Neitherbill was enacted into law. Appellees insistthat Congress' consideration and rejection ofthese amendments indicates both that 1114does not apply to benefits that are terminableat will, and that Congress concluded thatextending protection to such benefits wasunwise.

    We are unpersuaded. Evidence ofcongressional inaction is generally entitled tominimal weight in the interpretive process.This is especially true where Congress enactsa statute as clear as this one. In PensionBenefit Guaranty Corp. v. LTV Corp., 496U.S. 633 (1990), a case which also arose inthe wake of LTV's bankruptcy, the Supreme

    Court addressed whether the Pension BenefitGuaranty Corporation ("PBGC") could basea decision to order an employer to restorea pension plan on the employer's creationof "follow-on" plans, which the PBGC (*71)believed improperly exploited the agency.LTV relied in part upon the fact thatCongress had considered, but not enacted,an amendment that would have expresslyauthorized the PBGC to prohibit follow-on plans. Because Congress rejected the

    amendment, LTV argued that the Courtshould infer that Congress did not want theagency to have this authority. The Court wasnot convinced. It explained that:

    subsequent legislative history is a hazardousbasis for inferring the intent of an earlierCongress. . . . It is a particularly dangerousground on which to rest an interpretationof a prior statute when it concerns, asit does here, a proposal that does not

    become law. . . . Congressional inaction lackspersuasive significance because severalequally tenable inferences may be drawnfrom such inaction including the inference thatthe existing legislation already incorporatedthe offeredchange.

    Id. at 650 (internal quotation marks andcitations omitted) (emphasis added).

    Here, too, we think the best inferenceto be drawn from (*72) the subsequentlegislative history relied on by Appellees isthat Congress chose not to act because the

  • 8/8/2019 Third Circuit Opinion in Visteon Case

    16/24

    Page 16Industrial Div. of the Communications Workers of America v.

    Visteon Corp. (In re Visteon Corp.), 612 F.3d 210 (3d Cir. 2010)

    "existing legislation already incorporated theoffered change." Id.

    C. Absurdity

    As we have discussed, a court mustgive effect to a statute's unambiguousplain language "unless it produces a resultdemonstrably at odds with the intentions ofits drafters . . . or an outcome so bizarrethat Congress could not have intended it."Mitchell, 318 F.3d at 535 (internal quotationmarks and citations omitted); see also HolyTrinity Church v. United States, 143 U.S.457 (1892) ("If a literal construction ofthe words of a statute be absurd, theact must be so construed as to avoid

    the absurdity. The court must restrainthe words.") (internal quotation marks andcitations omitted). Having concluded that 1114 is unambiguous and certainly notdemonstrably at odds with indications ofcongressional intent in (*73) the statute'slegislative history, we are left with Appellees'final argument: that interpreting 1114 to giveretirees more rights under Chapter 11 thanthey would have outside of bankruptcy is soabsurd, notwithstanding the plain language

    of the statute and all the indications ofcongressional intent discussed above, thatCongress simply could not have intended theresult. This argument reflects a major sourceof confusion about 1114, and we believeit is the primary reason that courts havefailed to give effect to the statute as written.Accordingly, although we find the argumentmeritless, we address it with particular care.

    Appellees begin by emphasizing that

    our reading of 1114 is contrary tothe fundamental bankruptcy principle that"prepetition contract rights and propertyinterests should not be analyzed differentlyor enhanced simply because an interestedparty is involved in a bankruptcy case."Visteon's Br. 33 (quoting In reDelphi Corp.,2009 WL 637315, at *2). (*74) However, asthe Supreme Court explained in Butner v.United States, "[t]he constitutional authorityof Congress to establish `uniform Laws onthe subject of Bankruptcies throughout theUnited States' would clearly encompass afederal statute" modifying underlying property

    rights for the purposes of bankruptcy. 440U.S. 48, 54 (1979) (quoting U.S. Const., Art.I, 8, cl. 4). Thus, although property interestsare usually defined by non-bankruptcy law,a "federal interest [may] require[] a differentresult." Id. at 55.

    Section 1114 unambiguously states thatfederal bankruptcy law compels a "differentresult" here, yet courts have refused to allowthat result. For example, the bankruptcy courtreasoned, 1114 "cannot modify existing[non-bankruptcy] law absen[t] some specificbankruptcy reason and there is none herein connection with the issue of non-vestedretiree benefits." J.A. 3574. Consistent withthat court's (*75) conclusion, Appellees argue

    that it would be absurd to impose restrictionson the modification of benefits in bankruptcythat ERISA ensures will not be imposedoutside of bankruptcy. As a threshold matter,we point out that this argument sets far toolow a bar for "absurdity." See Terlingo, 327F.3d at 221 (Courts may look behind a statuteonly when the plain meaning produces "aresult that is not just unwise but is clearlyabsurd.") (internal quotation marks omitted).Furthermore, as we will now explain, it is also

    based on a fundamental misunderstanding ofthe context in which the RBBPA was enacted,as well as the practical realities surroundingan employer's provision of benefits to itsretirees.

    We begin with a brief discussion of howretiree benefits are treated under ERISA.ERISA was enacted "to promote the interestsof employees and their beneficiaries inemployee benefit plans," Shaw v. Delta

    Air Lines, Inc., 463 U.S. 85, 90 (1983),(*76) and to "protect contractually definedbenefits," Mass. Mut. Life Ins. v. Russell,473 U.S. 134, 148 (1985). Although ERISAcontains elaborate vesting requirements forpension plans, it does not mandate vesting ofwelfare benefit plans, such as those providingretiree health and life insurance benefits.See In reUnisys Corp. Retiree Med. BenefitERISA Litig., 58 F.3d 896, 901 (3d Cir.1995) ("Unisys II"). "This was not merely anoversight on the part of Congress." UAWv. Skinner Engine Co., 188 F.3d 130, 138(3d Cir. 1999). Congress did not impose

  • 8/8/2019 Third Circuit Opinion in Visteon Case

    17/24

    Page 17Industrial Div. of the Communications Workers of America v.

    Visteon Corp. (In re Visteon Corp.), 612 F.3d 210 (3d Cir. 2010)

    vesting requirements on welfare benefit plansbecause:

    it determined that [t]o require the vestingof those ancillary benefits would seriouslycomplicate the administration and increasethe cost of plans whose primary function is toprovide retirement income. . . . In rejecting theautomatic vesting of welfare plans, Congressevidenced its recognition of the need forflexibility with regard to an employer's right tochange medical plans.

    Unisys II, 58 F.3d at 901 (alteration in original)(internal (*77) quotation marks and citationsomitted). Congress believed that imposingstrict requirements on these benefits and

    thereby denying employers their valuedflexibility would result in employers choosingnot to provide the benefits at all. Employersare for this reason "generally free . . . forany reason at any time, to adopt, modify,or terminate welfare plans." Curtiss-WrightCorp. v. Schoonejongen, 514 U.S. 73, 78(1995).

    In light of the policy concerns underlyingERISA, Appellees argue that it is nonsensical

    to protect during bankruptcy what Congresspurposefully refused to protect otherwise.That argument, however, is premised onthe false assumption that the Congress thatenacted the RBBPA was content with thefallout from the policy decisions embeddedin ERISA. The legislative history of theRBBPA[fn22] establishes the (*78) contrary that many of its drafters were deeplytroubled by the social problems that hadresulted from the exclusion of retiree welfare

    benefits from ERISA's protections.

    As we have noted, LTV's termination ofretiree benefits prompted Congress to studynot only the treatment of retiree benefitsduring bankruptcy, but for the first timeafter enacting ERISA, to evaluate thesufficiency of retiree benefit protectionsmore broadly. See generally Fair-WeatherPromise. The consensus of many whotestified before Congress was that retireehealth benefits were unacceptably vulnerablebecause retirees, unlike working employees,were often entirely dependent on these

    benefits, and yet the law failed to ensurethat they vested at retirement. Althoughfederal common law under ERISA was thenmore protective of retiree benefits than it isnow, the emerging judicial view at that timewas that retiree (*79) benefits would vestat retirement, unless the employer clearlyindicated a contrary intent.[fn23] See, e.g.,id. at 46-59. Employers, armed with thisknowledge, were including reservation ofrights clauses in virtually all new plans. See,e.g., id. at 43 (testimony of Willis B. Goldbeck,Washington Business Group on Health)("[N]o new plans are being written withoutvery explicit authority to alter or terminate.").Accordingly, most retiree benefits, at least fornon-union retirees, would soon be entirely

    without protection, susceptible to terminationnot only during a bankruptcy, but wheneveran employer "simply amends the plan."[fn24]Id. at 94. (*80)

    Some legislators thus concluded that theproblem that must be remedied was not just bankruptcy law, [fn25] but ERISA itself.See, e.g, id. at 16 (statement of Sen. Dodd)("With the enactment of ERISA in 1974, theGovernment for the first time . . . rightly

    assumed a role in guaranteeing pensionrights in the private sector. It may be timeto consider extending similar protections toearned health benefits."). Although some(*81) continued to be wary about extendingthe full panoply of ERISA protections toretiree benefits, see, e.g., id. at 2 (statementof Sen. Heinz) ("[T]he simple solution wouldbe for the Congress to step in, as we did12 years ago with pensions, and make thesebenefits permanent at retirement, but we

    also need to recognize the chilling effect thiswould have on the employer's willingnesseven to offer these benefits."), there wasstill significant support for extending atleast some ERISA protections to the retireewelfare benefit context, see, e.g., id. at18 (statement of Sen. Glenn) (expressingsupport for minimum funding requirements forretiree health insurance plans); see also id.at 95 (staff report recommending additionalprotections for all retiree benefits, includingfunding and notification requirements, and"explor[ation of] a permanent means for

  • 8/8/2019 Third Circuit Opinion in Visteon Case

    18/24

    Page 18Industrial Div. of the Communications Workers of America v.

    Visteon Corp. (In re Visteon Corp.), 612 F.3d 210 (3d Cir. 2010)

    protecting unfunded retiree health benefits infull.").

    Ultimately, the RBBPA addressed retireebenefits only (*82) during bankruptcy.Nonetheless, the Senate Report indicatesthat congressional concern continued toextend further. The Report discussesgenerally the "hardship imposed on elderlyrecipients when such benefits are suddenlycurtailed." S. Rep. No. 100-119, 1988U.S.C.C.A.N. at 684. However, it explains,"this bill addresses the needs of retireeswithin [the] context of the traditional structureof the Bankruptcy Code. The broader issuesassociated with retiree benefits remain tobe addressed by other committees of

    appropriate jurisdiction." Id.

    To the extent that some courts havebeen unable to understand why Congresswould protect certain retiree benefits duringbankruptcy, but not otherwise, the shortanswer may be that the RBBPA, like manylegislative enactments, was an imperfectcompromise. Whether the statute was thebest protection that could be agreed upon, orwhether it was intended only as a first step,

    the RBBPA is the middle-ground that (*83)became law. That it is a partial solution tocongressional concerns in no way converts itinto an absurdity. Virtually all laws would beabsurd if judged by whether they accomplisha perfect solution to an underlying legislativeconcern.

    Moreover, since many members of Congresswere deeply upset at the prospectof employers terminating benefits during

    retirement, but were either unable or unwillingto require vesting, there is a compelling logicto protecting these benefits solely duringbankruptcy when benefits are highlyvulnerable, and limited protections can havea significant impact.

    As the union explained at oral argument,employers do not offer retiree benefits solelyto be charitable. Under normal conditions,retiree benefits benefit the employer as wellas the retiree. Retiree benefits are often aform of deferred (*84) compensation.[fn26]Through their provision, an employer is able

    to secure work now, and pay for it only fullyin the future. Furthermore, these benefitsboost morale and help an employer retainqualified employees. Contrary, during "goodtimes," market forces do much to restrain anemployer from exercising any retained right toterminate benefits.

    The same is not true during "bad times."It is then that retiree benefits are mostat risk. Of course, one of the purposesunderlying ERISA is to allow employersflexibility to terminate benefits when they feelit prudent to do so, as they presumably mightduring an economic downturn. A Chapter 11reorganization is unique, however, becausea reorganizing (*85) company avails itself of

    the statutory privilege of bankruptcy in orderto transition to greater viability. A reorganizingcompany hopes to emerge and be profitable,at which point the provision of retiree benefitsmight again inure to its benefit. During thereorganization process itself, though, thedebtor faces intense pressure both internallyand externally to relieve itself of all perceivedliabilities, even those it might otherwise beinclined to keep. See LTV Bankruptcy at14 (testimony of Richard Trumka, National

    President of The United Mineworkers ofAmerica) ("LTV says it is under enormouspressure from its creditors, banks, andvendors."); 1987 Senate Hearings at 16(statement of Sen. Heinz) (Making mattersworse in bankruptcy is that "the banks and insome cases the active workers may agree"that retiree benefits are "some kind of analbatross."[fn27]). (*86)

    Thus, as Professor Stabile thoughtfully

    explains, bankruptcy distorts the normaldecision-making process:

    Outside of bankruptcy, employers evaluatechanges in employee benefit plans in termsof their impact on overall human resourceobjectives as well as financial objectives;decisions about a particular benefit aremade within the broad context of anemployer's total compensation and benefitspackage. That overall framework is missingin a Chapter 11 case, where a debtorfaces pressures that distort nonbankruptcyplanning and decisions. In Chapter 11,

  • 8/8/2019 Third Circuit Opinion in Visteon Case

    19/24

    Page 19Industrial Div. of the Communications Workers of America v.

    Visteon Corp. (In re Visteon Corp.), 612 F.3d 210 (3d Cir. 2010)

    the debtor effectively does not act asa sole decision-maker. A strong creditors'committee or even a particularly largeindividual creditor plays a large role in thedebtor's decision-making. Within the confinesof a bankruptcy proceeding, there is thus adesire to temporarily freeze the status quoregarding benefits, and to allow modificationof those benefits only in a supervised mannerthat attempts to resolve the competinginterests of retirees, debtors, and creditors.

    Stabile, The Scope of Section 1114 at1953-54.

    Against this backdrop, 1114 can be seenas affording additional protection to retiree

    benefits just as legal and (*87) economicpressures converge to encourage a debtorto terminate benefits based on short-termconsiderations with insufficient regard forlong-term consequences to retirees or tothe debtor itself. Protecting these benefitsduring a Chapter 11 reorganization is thus ameasured middle-ground.

    Moreover, courts that have concluded it isabsurd to apply 1114 to benefits that

    could be terminated outside of bankruptcyhave often misinterpreted the rigidity of thesection's protections, and therefore the extentto which the statute is in tension withERISA. Section 1114 does not prohibit thetermination of benefits during a bankruptcyproceeding. Rather, it creates an equitableprocedure through which the debtor canargue the economic necessity of doing so,and the retirees can counter with their ownarguments about economics, fairness, and

    equity. The specter of this process may, byitself, foster an agreement about continuingor modifying retiree (*88) benefits that wouldotherwise be impossible to reach. However, ifno agreement is reached, a court can, and infact must, order modification (or termination)of benefits if doing so is necessary to thereorganization, fair to all affected, and clearlyfavored by the equities. This is a highstandard to reach, but that is consistentwith the belief that reorganization shouldnot take place, if at all possible, "on thebacks" of retired workers. 134 Cong. Rec.S6823-02 (daily ed. May 26, 1988) (statement

    of Sen. Metzenbaum). Importantly, though,in its weighing of the equities, a court willundoubtedly consider whether the debtor hasreserved the right to unilaterally terminatebenefits. It would not be the beginning and theend of the court's inquiry, and the court wouldhave to decide how much weight to give thatfactor in light of all the other equities. Still,a debtor's legal rights under ERISA are notirrelevant during the 1114 process.

    Additionally, it must be remembered that 1114's (*89) protections terminate upon planconfirmation, when the distorting pressuresdiscussed above recede. Thus, contrary tothe court's conclusion in In re N. Am.Royalties, Inc., 276 B.R. at 867 (construing

    1129(a)(13) as "vest[ing] . . . benefitsafter reorganization"), 1129(a)(13) does notvest benefits. As we have explained, uponemergence from bankruptcy, 1129(a)(13)ensures that a debtor who reserved the rightto terminate retiree benefits has no ongoingobligation, other than one that may havebeen voluntarily undertaken during the 1114process, to continue to provide benefits.

    Therefore, 1114 is neither entirely nor

    permanently in derogation of underlyingcontractual rights. For the most part, all 1114 guarantees retirees is a voice, andsome minimal amount of leverage, in aprocess that could otherwise be nothingshort of devastating to them and to theirfamilies and (*90) communities.[fn28] Asone legislator explained: "[t]his legislationwill not guarantee continuation of thesebenefits, but it will provide a mechanismthat will allow the retirees' position to be

    heard." 133 Cong. Rec. 3,732 (1987); seealso 134 Cong. Rec. S6823-02 (daily ed.May 26, 1988) (statement of Sen. Heinz)("While chapter 11 reorganization . . .work[ed] to protect the (*91) interests of themajor, and usually secured, creditors, it leftthe retirees totally exposed to catastrophicmedical losses while bankruptcy lawyersbickered over the reorganization plan. Theretirees had no way to make their concernsknown to the court during bankruptcy"). Wetherefore reject Visteon's characterization of 1114 as a "hammer." It is much moreaccurately characterized as a "microphone,"

  • 8/8/2019 Third Circuit Opinion in Visteon Case

    20/24

    Page 20Industrial Div. of the Communications Workers of America v.

    Visteon Corp. (In re Visteon Corp.), 612 F.3d 210 (3d Cir. 2010)

    intended to elevate the voices of those whowould otherwise not be heard above the dinof more powerful creditors carving up the pieof the bankruptcy estate.

    Appellees attempt to argue that ourinterpretation of 1114 results in the statutebeing the only provision of the bankruptcycode that improves upon a creditor's rights inbankruptcy; the union does not counter thatassertion.[fn29] (*92) Assuming, arguendo,that the statutory scheme of 1114 is unique,this result is certainly not absurd givenCongress' concerns. The RBBPA's legislativehistory is replete with references to the uniquenature of retiree benefits in a bankruptcyproceeding, and it is therefore not surprising

    that Congress would afford them uniqueprotections. As the Senate Report noted:"[t]he special treatment accorded retireebenefit payments is appropriate because ofthe hardship imposed on elderly recipientswhen such benefits are suddenly curtailed."S. Rep. No. 100-119, 1988 U.S.C.C.A.N. at684. Senator Heinz reasoned that "special"protection was necessary to ensure equalityof treatment: "[Retirees] don't start out ona[n] equal footing with other creditors. . . .

    [This bill protects] retirees from the kinds ofrisks no other creditors face." 1987 Hearingsat 20 (statement of Sen. Heinz). The courtin In re Farmland Indus., Inc. thus foundit unremarkable that retirees were uniquely(*93) protected in bankruptcy:

    Congress doubtlessly recognized thatretirees as a class are unique in a bankruptcyproceeding and that they are deserving ofspecial protection. . . . As a general rule,

    retirees are particularly vulnerable when theirformer employer goes bankrupt, because oftheir ages, their reduced incomes, and theirinability to replace the benefits . . . that arebeing terminated. Unlike business and tradecreditors, retirees are unable to set asidereserves for possible losses or to pass alongtheir losses to other customers. . . . All ofthese suggest a sound basis and rationalefor Congress' according special protections toretirees who are caught up in a Chapter 11proceeding.

    294 B.R. at 918-19.

    For all of these reasons, we conclude thatthe rule of statutory construction allowing acourt to ignore the plain language of a statutewhen literal interpretation results in absurdityis entirely inapplicable here. Far from being"absurd," a literal interpretation of 1114reveals a remedial and equitable statutoryscheme that, consistent with Congress'concerns when (*94) enacting the RBBPA,attempts to prevent the human dimensionof terminating retiree benefits from beingobscured by the business of bankruptcy.

    The text of 1114 is plain in meaning andbreadth. Its wisdom is not for us to decide. Weneed not, and should not, be concerned with

    whether retiree benefits should be extendedgreater protection during bankruptcy thanotherwise; that is a job for Congress. Weneed only give effect to the law Congress hasenacted.

    V. Conclusion

    For the reasons set forth above, we willreverse the district court's order that affirmedthe bankruptcy court's order (*95) permitting

    Visteon to terminate provision of retireehealth and life insurance benefits withoutcomplying with 1114.

    [fn1] The union also argues that thebankruptcy court erred in finding thatVisteon has the right to unilaterallyterminate these benefits under the relevantplan documents and collective bargainingagreements. Because we conclude that 1114 applies regardless of whether Visteon

    has such a right outside of bankruptcy,we need not reach this question. Forthe purposes of our opinion, we assume,arguendo, that Visteon could unilaterallyterminate these benefits if it were not in aChapter 11 bankruptcy proceeding.

    [fn2] The last CBAs at each plant includedcommitments by Visteon to provide retireebenefits. SeeJ.A. 691, 1355. These expresswritten commitments were not continued afterthe plants were closed.

  • 8/8/2019 Third Circuit Opinion in Visteon Case

    21/24

    Page 21Industrial Div. of the Communications Workers of America v.

    Visteon Corp. (In re Visteon Corp.), 612 F.3d 210 (3d Cir. 2010)

    [fn3] Section 363(b)(1) provides that thebankruptcy trustee "after notice and ahearing, may use, sell, or lease, other thanin the ordinary course of business, propertyof the estate. . . ." 11 U.S.C. 363(b)(1).This provision is in contrast to transactionsthat are in the ordinary course of businessunder subsection (c)(1) of 363, which do notrequire notice and a hearing. See11 U.S.C. 363(c)(1).

    [fn4] The bankruptcy court granted Visteon'smotion to terminate all retiree benefits, exceptfor those promised or provided to present andformer employees at Visteon's North Pennplant, pursuant to a CBA that had not yetexpired. SeeJ.A. 3581-82. The court made

    clear, however, that once the CBA did expire,Visteon could terminate those benefits aswell. SeeJ.A. 3582.

    [fn5] As of August 2009, approximately fortypercent of the Connersville and Bedfordretirees were not yet eligible for Medicare.SeeJ.A. 3690.

    [fn6] A Visteon benefits administratorsubmitted a declaration to the bankruptcy

    court explaining that a stay which requiredVisteon to provide insurance through itsoriginal benefit plans, rather than throughthe COBRA plans it was poised to put intoeffect, could not be effectuated by the healthinsurance companies for approximately threemonths, and during that time, no one,including those retirees who had electedCOBRA coverage, would be covered. SeeJ.A. 3688-95.

    [fn7] On April 13, 2010, we granted theunion's motion to expedite the appeal, butdenied the motion to continue the stay. Thestay granted by the district court expired April30, 2010.

    [fn8] The cost of COBRA coverage forthose retirees who submitted declarations tothe bankruptcy court ranges from $670.85to $2,012.54 a month, constituting twenty-three to eighty-six percent of the retirees'monthly incomes. See J.A. 3656-87. Manyof these retirees and their family memberssuffer from extremely serious medical

    conditions, including cancer, diabetes, heartdisease, muscular dystrophy, fibromyalgia,chronic obstructive pulmonary disease, andschizophrenia. See id.

    [fn9] Congress enacted and twice renewedstop-gap legislation to ensure that LTVcontinued to pay its retiree benefits whileCongress debated the problem. SeePub.L.No. 99-591 tit. VI 608(a) ("Notwithstandingany provision of chapter 11 of title 11,United States Code, the trustee shall paybenefits until May 15, 1987 to retired formeremployees under a plan, fund, or programmaintained or established by the debtor priorto filing a petition (through the purchaseof insurance or otherwise) for the purpose

    of providing medical, surgical, or hospitalcare benefits, or benefits in the event ofsickness, accident, disability, or death.");Pub.L. No. 100-41 (extending requirement topay benefits to September 15, 1987); Pub.L.No. 100-99 (extending requirement to paybenefits to October 15, 1987). Finally, in1988, it enacted the RBBPA, which itselfcontained an interim measure extending thestop-gap protections to certain cases alreadyproceeding in bankruptcy. The rest of the

    RBBPA, codified at 11 U.S.C. 1114 and 11U.S.C. 1129(a)(13), applies to bankruptcyproceedings commenced after its enactment.

    [fn10] A trustee is defined for the purposesof 1114 to include a debtor in possession,and therefore includes Visteon here. See11U.S.C. 1114(e)(1).

    [fn11] "A labor organization shall be . . . theauthorized representative of those persons

    receiving any retiree benefits covered byany collective bargaining agreement to whichthat labor organization is a signatory," unlessthe labor organization declines to servethat role, or the court "determines thatdifferent representation of such persons isappropriate." 11 U.S.C. 1114(c)(1). "[A]committee of retired employees . . . [shall]serve as the authorized representative . . . ofthose persons receiving any retiree benefitsnot covered by a collective bargainingagreement" if the debtor seeks "to modify ornot pay the retiree benefits or if the court

  • 8/8/2019 Third C