Enron Corp. has forcefully asked the New York Bankruptcy Court overseeing its chapter 11 case to enjoin the Pension Benefit Guaranty Corp.’s lawsuit in Houston to take over four of Enron’s retirement plans.
In pleadings filed Wednesday, Enron accused the PBGC of, among other things, forum shopping, attempting to frustrate its reorganization plan, and usurping the Bankruptcy Court’s authority to consider claims against the company. Not bad for starters.
In short, Enron accused the PBGC of trying to obtain in the Houston U.S. District Court what it could accomplish in the New York Bankruptcy Court during the confirmation hearing on Enron’s plan. The Bankruptcy Court previously denied the PBGC’s objection to Enron’s plan, which the Bankruptcy Court confirmed on July 15.
The PBGC — which provides a measure of subsidy for defunct private-sector pensions — is trying to proceed with a lawsuit that it filed June 3 in U.S. District Court in Houston to terminate Enron’s four woefully underfunded pension plans.
By pursuing the termination action in Houston federal court, Enron asserts that the PBGC is trying to avoid Enron’s plan treatment for its unliquidated and contested claims and elevate those claims over those of similarly situated creditors. The PBGC has asserted claims against Enron totaling over $300 million for the Enron-related pension plans — the Enron Corp. Cash Balance Plan, Garden State Paper Pension Plan, Enron Financial Services Pension Plan, and San Juan Gas Co. Pension Plan. Those four plans have approximately 17,000 participants.
As long as the agency’s claims remain unresolved, Enron is required to reserve under its reorganization plan for the full amount of the PBGC’s claims. If the PBGC claims are disallowed or reduced, then the amount Enron will have to pay to terminate the four pension plans will likely be substantially less than the amount that the the PBGC seeks in its termination action. Enron contends that the Bankruptcy Court must determine the amount of the PBGC claims before the termination action can proceed and, thus, asserts that the Bankruptcy Court should enjoin the PBGC from proceeding with the termination action in Houston federal court.