Michigan Attorney General Dana Nessel led a coalition with six other attorneys general in filing an amicus brief before the United States Supreme Court in Dennis Black et al v. Pension Benefit Guaranty Corporation, which argues the due process rights of former Delphi Corporation employees were violated when the corporation’s bankruptcy resulted in termination of Delphi’s pension plan.
Petitioners in the lawsuit are former employees of Delphi, an auto-parts manufacturer and supplier, and were participants in Delphi’s pension plan. After Delphi filed for bankruptcy, Pension Benefit Guaranty Corporation (PBGC) executed an agreement with the pension plan’s administrator to terminate the pension plan.
Many participants lost between 30% and 70% of their vested benefits. The affected participants, and petitioners in this case, sued in district court, arguing that the pension plan termination was illegal. The district court and Sixth Circuit rejected their claims, resulting in this appeal to the United States Supreme Court.
“For many of the affected employees, their careers were spent entrusting Delphi to deliver on its pension plan,” Nessel said. “Losing vested benefits – through no fault of their own nor with any say in the matter – violated the rights of these employees. Our filing seeks to rectify that grave error.”
The question presented is, “Do retirees have a property right in vested but unfunded pension benefits, such that termination of those benefits without adequate procedural safeguards violates due process?”
In Michigan, nearly 6,000 of its seniors were once covered by the salaried pension plan of the former auto parts maker, which once operated plants and offices in Detroit, Flint, Saginaw, Grand Rapids, and other cities across the state. Nationally over 20,000 Delphi salaried retirees have been affected.
The brief asserts in part, “According to the Sixth Circuit, the retirees had no cognizable legal right to the portion of their pension benefits Delphi had not funded. This was despite the fact that the benefits in question had vested—a term which in ordinary usage, in ERISA, and in caselaw de-notes the conferring of a property right. The Sixth Circuit’s broad holding has dire implications within that circuit, as well as anywhere else where the same is adopted. Retirees already occupy a precarious position, reliant for their survival on pensions and other fixed sources of income. It is concerning enough that these individuals can be endangered when their former employers proceed in bankruptcy and are judicially relieved of their commitments. But at least in a bankruptcy proceeding, there is a recognition that creditors have property rights, and there are safeguards in place and a process that ensures that all parties are heard, after which a judge—not a government corporation—makes the final adjudication. Here, retirees had no opportunity to challenge the plan termination before it was terminated, since the bankruptcy court would not hear the challenge, and the respondents then terminated the plan with-out an adjudication. And when the retirees sought post-deprivation relief, the Sixth Circuit held they had no constitutional right to any process at all. The decision below should be reversed because it failed to even recognize that the retirees had a cognizable property interest in the payments they had been promised.”
The coalition also notes in the brief, “the fundamental constitutional error the Sixth Circuit committed is not limited to Delphi retirees. The broad holding is precedential in the States of the Sixth Circuit, and, if found persuasive and adopted by other courts of appeals, could wreak economic havoc in other states. Thus, even amici States with a small number of Delphi retirees have an interest in this case and sign onto this brief to protect the constitutional rights of their citizens in future cases.”
Joining Nessel in this filing are the attorneys general of Delaware, Florida, Minnesota, Ohio, Pennsylvania, and Vermont.
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