Third Circuit Upholds PBGC Relief-Fund Asset Regulations Under Loper Bright 

Earlier this month, the Third Circuit released its decision in In re Yellow Corp., a case that started as a high-stakes bankruptcy dispute and ended up involving a challenge to the Pension Benefit Guaranty Corporation’s (“PBGC”) regulations imposing “reasonable conditions” on the use of COVID-19 relief funds.  The Yellow Corp. decision offers another example of Loper Bright implementation and provides insight into how courts are handling cases involving express delegations of “gap-filling” regulatory authority to agencies in the post-Chevron era. 

Background: Yellow Trucks and Pension Funds 

Yellow Corp. arose from the windup of the Yellow Corporation, which was once a major American trucking company.  After the firm filed for bankruptcy in 2023, it withdrew from several multi-employer pension plans (“MEPPs”).  The pension plans then filed claims against Yellow Corporations’s estate, seeking payment of the company’s “withdrawal liability” due to early exit from the plans.  That liability amounted to Yellow Corporations’s share of its unfunded pension promises—an amount roughly equal to the difference between the MEPPs’ vested benefits and their total assets. 

The specific calculation of Yellow Corporation’s total liability, however, was complicated by legal changes stemming from Congress’s decision during the COVID-19 pandemic to infuse billions of dollars of relief funds into struggling pension plans with the American Rescue Plan Act.  That legislation empowered the PBGC to craft regulations limiting how and when relief funds could be counted as pension plan “assets” for withdrawal-liability calculation purposes.  The PBGC promulgated two such rules—the Phase-In Regulation and No-Receivable Regulations—which ultimately inflated Yellow Corporation’s withdrawal liability.  Yellow Corporation and its creditors argued the PBGC had impermissible allowed the exclusion of relief funds from plans’ “assets.” 

The Holding: The PBGC Acted Within the Scope of Its Delegated Authority 

The Third Circuit upheld the PBGC rules.  Most relevant to Loper Bright, the Circuit recognized the laws at issue had endowed the agency with the regulatory authority to flesh out the statutory formula for withdrawal liability.  Quoting the Bankruptcy Court below, Judge Thomas Ambro explained: 

Congress has expressly granted the PBGC the type of gap-filling authority that Loper Bright described, both in [the Employee Retirement Income Security Act] . . . and again in the provisions of [the American Rescue Plan Act][.] . . .  In fact, ARPA explicitly grants PBGC the power to set conditions on the “allocation of plan assets,” as it did with these regulations. 

In Loper Bright, the Supreme Court recognized that, while courts always retain responsibility for providing their best, independent judgment about the meaning of the law, sometimes a “statute’s meaning may well be that the agency is authorized to exercise a degree of discretion,” such as when Congress “expressly delegate[s] . . . authority to give meaning to a particular statutory term” or “‘fill up the details’ of a statutory scheme.”   

Yellow Corp. presented exactly this scenario—one where Congress gave the PBGC the authority to “effect the statute’s goals” by “ensur[ing] that” relief funds were “used for the statutorily mandated purpose of being ‘allocat[ed]’ in ways that would comply with ARPA.”  Between that delegation and Congress’s concurrent decision to expressly permit the PBGC to “‘prescribe by regulation actuarial assumptions’ for calculating unfunded vested benefits,” it was clear the agency enjoyed discretion that did not categorically prohibit the regulations at issue. 

But the Circuit did not stop there.  As Loper Bright further provides, even if a reviewing court recognizes a valid delegation—by ensuring its constitutionality and fixing the bounds of the agency’s authority—it must still “ensure[] the agency has engaged in ‘reasoned decisionmaking’ within those boundaries.”  That entails State Farm “hard look” review.  And, here, the Yellow Corp. court determined the PBGC’s regulations passed muster under the Administrative Procedure Act’s “arbitrary and capricious” standard.  The court noted the “comprehensive” notice-and-comment process undertaken by the agency, its consideration of the adverse effects of alternative regulatory options, and the agency’s reasonable predictive judgments about the economy and pension-fund industry. 

So What?  Lessons from Yellow Corp. 

The Third Circuit’s opinion in Yellow Corp. seems to reflect careful engagement with relevant statutes and a straightforward application of Loper Bright.  The court recognized that statutory ambiguity is not, by itself, license for agency action and thus carefully examined the ARPA and other laws to ensure Congress had actually delegated discretionary authority to the PBGC.  After recognizing the bounds of that authority, the court also followed Loper Bright’s command by applying a more deferential standard of review.  The Circuit did not simply rubber-stamp the PBGC’s legal interpretations, but ensured the agency had undertaken reasoned decisionmaking, consistent with Congress’s directives.  

The lessons for other courts moving forward should be clear: independently analyze statutory text and context and, if there is a valid delegation of discretionary authority, police the boundaries of the delegation.  Agencies cannot (and should not) expect their positions to receive any sort of reflexive deference as part of that analysis.  In the wake of Loper Bright, the boundaries of agency power are to be drawn by Congress and policed by the courts.