The Pension Benefit Guaranty Corporation (PBGC) (plaintiff) was a federal corporation to which the Administrative Procedure Act (APA), 5 U.S.C. § 551 et seq., applied. The PBGC was responsible for overseeing a government insurance program created by Title IV of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1301 et seq. The PBGC had the authority to take over covered pension plans and use plan assets to satisfy a plan’s obligations, as well as use PBGC funds to pay vested plan benefits to members. The PBGC could also restore a previously terminated plan through an informal adjudication process, returning responsibility for the plan’s obligations to the sponsoring employer. The LTV Corporation and its subsidiaries (LTV) (defendant) sponsored three pension plans covered by Title IV of ERISA, but LTV was unable to satisfy the benefits obligations to employees. LTV sought to have the PBGC terminate the plans and assume responsibility for LTV’s unfunded obligations, which would free LTV to negotiate new pension plans with its employees. The PBGC decided to terminate the plans in order to protect the insurance program from an unreasonable risk of loss. LTV thereafter negotiated new pension agreements that, combined with PBGC insurance benefits, provided LTV’s employees with essentially the same pension benefits. The PBGC believed the new pension agreements, known as follow-on plans, to be abusive of the insurance program. In 1987, the PBGC determined that there was no longer an unreasonable risk of loss to the insurance program. The PBGC notified LTV that the pension plans would be restored pursuant to section 4047 of ERISA, in part because of the PBGC’s policy against follow-on plans and in part because there was no longer an unreasonable risk of loss. However, LTV objected to the restoration decision and refused to comply. The PBGC initiated an enforcement action against LTV in federal district court. The district court and court of appeals ruled in LTV's favor, finding that the PBGC’s decision making process had lacked adequate procedural safeguards, and that, therefore, the PBGC’s decision was impermissibly arbitrary and capricious. The United States Supreme Court granted certiorari.