Supreme Court declines to take up case of Delphi retirees over lost pensions

Melissa Nann Burke
The Detroit News

Washington — The U.S. Supreme Court said Tuesday it won't take up the case of former Delphi Corp. salaried workers who fought in court for more than a decade to restore their pensions, closing a long-simmering legal battle linked to General Motors' bankruptcy. 

The high court denied the Delphi retirees' request that the justices review their case, letting stand a ruling by the 6th Circuit U.S. Court of Appeals upholding the government termination of their pension plans. 

The retirees' petition to the justices was a long shot to start — "a hopeless last gasp," said Norman Stein, a professor who teaches employment benefits law at Drexel University's law school.

"It’s unfortunate the court didn’t take the case, but it’s not surprising," Stein said. "They only take so many cases a year. They may have looked at this as strictly a procedural issue that may not occur again, or may not occur very much or isn't really harming people." 

But Tuesday's decision was deflating for the non-union retirees of the former General Motors Corp. parts unit who had asked the justices last summer to consider their arguments. About 20,000 workers were affected by the pension cuts, including close to 6,000 in Michigan.

The retirees had won the support of attorneys general from seven states including Michigan; 16 bipartisan members of Congress; and a group representing retirees and future retirees who warned of implications for thousands of other pensioners.

"To say we are disappointed would be a terrible understatement. We held out some high hopes for this," said retiree Chuck Cunningham, legal liaison to the Delphi Salaried Retirees Association. 

"We’ll never know why they didn’t take it, but we’ll always feel pretty bad about it. It’s pretty tough news to take for so many of our members." 

While this lawsuit has ended, Cunningham said their fight will continue on other fronts, including in Congress, where the group of retirees has been pushing for relief. 

"Let's just put it out there — it's not the last lawsuit that could ever be filed," he said. "We’re not easily persuaded to give up."

How legal fight began 

The lawsuit dates back to 2009. As GM went through a quick-exit bankruptcy in 2009, the decision was made to "top up" the pensions of most union Delphi hourly workers and retirees, largely those of the United Auto Workers, to the full amount promised by GM. 

GM did not do the same for 20,000 salaried retirees and pension participants at Delphi, a former GM subsidiary that was spun off in 1999 and which filed for bankruptcy in 2005. GM later told a 2011 government audit that it made the call "because of its dependence" on the UAW. 

Under the agreement at issue in the lawsuit, the Pension Benefit Guaranty Corp. — the government-owned pension insurer — was to terminate the Delphi salaried workers' plan and release any remaining liens and claims on Delphi’s assets. 

Some pensioners and other plan participants lost as much as 70% of their vested benefits, according to court records. 

"Our key point was there was this rating that our pension plan was 86% funded in the middle of 2009, but they went ahead and involuntarily terminated it," said Ron Beeber of Pentwater, a retired Delphi manager who sits on the board of the Delphi Salaried Retirees Association.

"And we never had a chance to object to that. That's really one of the things that's just so disappointing. Because you think you have constitutional rights of due process there that that would have come into play."

At dispute in the lawsuit was whether the federal Employee Retirement Income Security Act of 1974 required the PBGC to secure a judicial decree before ending a "distressed" pension plan.

The Delphi retirees had argued it must do so, but the PBGC maintained that the law allows for an alternative for terminating a distressed pension plan by agreement between PBGC and the plan's administrator. 

A three-judge panel of the 6th Circuit in 2020 sided with the PBGC in concluding that a provision in the law does permit the end of distressed pension plans by such an agreement without court adjudication. 

The panel also ruled the PBGC's termination wasn't arbitrary because it had many competing interests to weigh in deciding to end the plan, and "that decision was made in the context of the government’s urgent attempt to save GM and the automotive industry."

Pension agency's reasoning

The justices' passing over the case is a win for the PBGC, which declined to comment Tuesday.

The agency had urged the high court not to hear the case, saying the Delphi retirees were seeking to "relitigate" the lower courts’ "thorough and careful review of the facts and proper application of this court’s precedent and ERISA’s plain text in this hard-fought litigation."

"PBGC’s termination of the Delphi Salaried Plan was carried out by agreement in the same manner that PBGC has conducted thousands of terminations in the decades since ERISA’s enactment, and no court has ever suggested that those terminations were unlawful," attorneys for the PBGC wrote in a December brief to the justices.

"To the contrary, the termination here enabled PBGC to begin using its insurance funds to fulfill ERISA’s promise by making statutorily guaranteed payments to plan participants — payments the Salaried Plan participants have now been receiving for more than a decade that would otherwise have been lost if PBGC had not stepped in."

The PBGC noted that it has been paying retirement benefits to the Delphi salaried plan participants since the plan termination in 2009, paying out of its insurance funds nearly $1.5 billion in benefits that were unfunded in the Delphi plan.

The agency told the high court that all plan participants have received "at least" the statutorily guaranteed insurance, and over 1,000 participants in the salaried plan received or will receive benefits in excess of the statutory guarantee based on the allocation of remaining plan assets.

Stein of Drexel University's Thomas R. Kline School of Law said he has sympathy for the Delphi salaried retirees, agreeing with their lawyers' characterization that they were "basically road kills to protecting other people," rather than the Delphi salaried employees.

"I do think the lawyers correctly identified the procedural elements of the case as the best way to get the court to take a look at it," Stein said. 

There are all sorts of reasons the justices may have rejected the case, some having nothing to do with whether the legal opinion below was correct, he said.

"They have limited jurisdiction, and they choose their cases," Stein said. "In the scheme of things, I would have been happily surprised if they had taken the case, but I think was a long shot. And my guess is that the attorneys knew it was a long shot."

Given the amount of discretion that agencies have on a matter like this, even if the PBGC had proceeded the way the retirees had wanted, the result might have been the same anyway, Stein said. 

Some justices also might have been persuaded by the idea that the Delphi retirees' prevailing may have put stress on the viability of the PBGC's insurance program, he said. 

Beeber said the retirees association had been hopeful the court would hear them out, in part because the justices seemed to show interest by directing the PBGC to respond to the retirees' petition after the agency initially waived a reply last year. 

"They didn’t really say that what the PBGC did is legal. They just chose to not look at the case," Beeber said. "We were disappointed in that because we think that affects so many of our people and also the other folks who come along and have similar circumstances down the road."

The Delphi retirees are turning their sights to Congress, working with the office of U.S. Rep. Dan Kildee, D-Flint Township, on a bill that would provide some sort of relief for the affected Delphi pensioners.  

Kildee in a tweet Tuesday expressed his disappointment with the high court.

"This decision underscores the need for Congress to act to restore their hard-earned pensions," he said. "I will not stop fighting to ensure the Delphi Salaried Retirees can retire with dignity."

The bill hasn't yet been introduced, but Kildee's office said Tuesday that the aim is to do so within the next month. 

"We’re hoping this legislation gets introduced sooner rather than later," Beeber said.