In Oneida Ltd. v. Pension Benefit Guaranty Corp., the U.S. Bankruptcy Court for the Southern District of New York addressed the issue of whether a debtor’s liability for pension termination premiums (“DRA Premiums”) constituted a pre-petition contingent “claim” and was, therefore, dischargeable pursuant to the debtor’s reorganization plan confirmation. 383 B.R. 29, 32 (Bankr. S.D.N.Y. 2008). The Bankruptcy Court held that the debtor’s liability for DRA premiums was a dischargeable pre-petition “claim” even though the pension termination occurs during the debtor’s chapter 11 case. Id. at 32, 43.
The Bankruptcy Court based its holding on three determinations: (1) that DRA Premiums fell within Bankruptcy Code section 101(5)(A)’s definition of the term “claim”; (2) that the resulting “claim” arose pre-petition despite 29 U.S.C. § 1341(c)(2)(B), which provides that DRA Premiums shall not arise “until the date of discharge”; and (3) that the Deficit Reduction Act of 2005 (“DRA Amendment”), an amendment of the Employee Retirement Income Security Act (“ERISA”), did not present a “clear and manifest” intent of Congress to amend the Bankruptcy Code, a threshold issue that must be met before the Bankruptcy Court could consider the DRA Amendment’s underlying policies. Id. at 36–38, 40–41.
The Bankruptcy Court dismissed the Pension Benefit Guaranty Corporation’s (“PBGC”) argument that DRA Premiums were not “claims.” The PBGC had argued that DRA Premiums are not “claims” because, by statute, the PBGC’s right to payment was not enforceable until Oneida’s chapter 11 discharge or case dismissal. Dismissing this argument, the Bankruptcy Court held that DRA Premiums constituted pre-petition “classic contingent claim[s].” Id. at 38.
The decision is currently under appeal to the Second Circuit Court of Appeals. As of now, the Bankruptcy Court’s Oneida decision is the first reported and only decision to consider whether DRA Premiums are “claims” under section 101(5)(A). However, case precedent provides guidance in assessing whether the Bankruptcy Court correctly decided Oneida.