Richard J. Rybarczyk, Minoru Mizuba, and William Rittenhouse v. Trw, Inc. And Trw Salaried Pension Plan

975 intri- upset would Act, otherwise a To hold Rights Human Texas Under and interplay between federal cate his state first exhaust must complainant We agencies. a state anti-discrimination request remedies and administrative Jones, receiving his EEOC 'after that before note from the TCHR letter to sue right letter, a initially filed had to sue right The exhaustion action. a civil filing (1) in state Act claim Rights Human ways: two Texas met can be quirement (before to feder- removed it cause Grinnell reasonable court not find does the TCHR (2) court). accepted the district If we al complaint; dismisses mean a federal ruling, would within court’s it complaint resolve cannot TCHR jur- a state court’s could agency determine days. See ÁNN. Tex. Lab.Code. law claim. purely a state right to to hear received a isdiction neither Jones 21.208.3 Working not believe nor waited We do the TCHR sue letter from Rights Human or the Texas Agreement his com- to resolve TCHR days for the result. reme- intended that state Act failure to exhaust plaint. His this civil action. precludes dies and dismiss vacate We jurisdiction. Furthermore, to sue lack of right the EEOC’s right for a TCHR substitute letter cannot Admittedly, under letter.

to sue EEOC

Worksharing Agreement, its other as “designate [each]

the TCHR receiving and purpose

agent for But the federal-state charges.”

drafting the exhaus does not extend

cooperation Hous remedies. tion of administrative Cf. RYBARCZYK, Mi Minoru Richard J. Valdez, 841 S.W.2d ing Auth. v. Rittenhouse, zuba, and William (noting the difference (Tex.Ct.App.1992) Plaintiffs-Appellees, complaint a pursuing “filing between Commission”). with the v. ex Indeed, Worksharing Agreement Pension TRW, and TRW Salaried INC. include not “does pressly cautions Defendants-Appellants. Plan, Agency to determine one right 97-4167. No. over Agency of the other

jurisdiction re Circuit Similarly, the Fifth charge.” Appeals, Court United States that “[w]e context in a different cently held Circuit. Sixth that an with the district agree cannot 9, 1998. Argued Dec. interchangea to sue’ letter ‘right EEOC civil file a ‘right to TCHR ble with a 21, 2000. Filed Dec. Decided Co. Eureka letter.” Vielma action’ Cir.2000) (5th (holding that 458, 464 F.3d not inter to sue letters right the 60- of triggering in terms

changeable filing requirement).

day Rather, it mean we read 21.252(d) live remedies. Hu- the Texas 3. We note his who has exhausted complainant that a confu- potentially cause Rights Act can man a civil days file can or waited remedies requirement. That the exhaustion about sion timely a neglects to issue if the TCHR action [a to issue explains that "[f]ailure section Otherwise, administra- right to sue letter. affect the com- does right letter] to sue formality, become mere tive scheme would action.” a civil right bring ... plainant’s Human file a Texas complainant could allowing as interpret this section We do not a civil file action, complaint, and then Rights Act regardless complainant to file a civil day. action the same administra- exhausted his state he of whether (briefed), Gary, Naegele Gary D. Robert Lorain, Ohio, Theado, E. Slater Paul & (briefed), Spitz, & Slater Chica- Sperling, IL, (argued and Zagrans Eric H. go, OH, Firm, briefed), Elyria, Law Zagrans Plaintiffs-Appellees. for NELSON, WELLFORD, Before DAUGHTREY, Judges. Circuit NELSON, J., delivered the A. DAVID court, in which opinion of WELLFORD, J., DAUGHTREY, joined. J., 987), opinion a separate (p. delivered dissenting part. concurring part OPINION NELSON, Judge. A. Circuit DAVID manufac- appeal by Here we have from pension plan turing company and its in favor of a class of summary judgment from early retirement employees who took class-members company. bene- pension claimed that the were to them at retirement fits distributed low amount. too that court concluded The district Inc.) (TRW, collaterally es- employer benefit calcu- make its topped less favorable methodology lations under by this than mandated retirees action, Costantino class court in earlier Inc., TRW, 13 F.3d 969 further held The district were entitled of the class members greater of at the interest Treasury U.S. 52-week actually realized return or rate of bills have been money found to on the (briefed), Vorys, Sa- Read withheld. wrongfully Winship John OH, Pease, Cleveland, fer, Seymour & cal- the benefit Upon de novo review of TRW, Inc. Defendant-Appellant issue, plain- that the we conclude culation itself briefed), not entitled avail tiff class (argued Cupps David S. We further Safer, estoppel doctrine. (briefed), collateral Vorys, N. Robert Webner conclude, portion Columbus, OH, Pease, John Seymour & to service attributable payments (briefed), Martin- Amanda Read Winship amend- to a certain Seymour & rendered Safer, (briefed), Vorys, sek adopted on December OH, Pease, Cleveland, Defendant-Ap- rule” of the “anti-cutback a violation flects Plan. Pension pellant Salaried Employee contained Retirement In- age-65 available to retirees. The benefit (“ERISA”) .by called, Security come Act of 1974 received retirees was (the jargon cognoscenti, a “subsi- Revenue Internal Code “I.R.C.” dized” benefit. “Code”). violation, There was no our view, to the portion attribut- provided also retirees able to service rendered subsequent to the pension could elect to take their benefits in amendment. sum, a lump payable up-front, rather monthly series of payments. The As to the district court’s resolution of amount sum was calculated question, we find a prescribed formula that discount- no of the court’s abuse discretion. monthly ed the payment to its stream challenged judgment will be af- present value. Prior to plan part in and in part. firmed reversed provided that the interest rate in used making value calculation would I be the Aaa bond rate. As of to by the enactment 1984— 1984,1 Equity Retirement Act of Congress of the first of series ERISA Congress a ceiling set on the interest rates and I.R.C. amendments that shall de- we could be used calculating pres- presently scribe Salaried Pension —TRW’s (It pension ent value of future payments. (a plan, defined opposed benefit as to helpful will be keep to the following rela- plan) defined contribution offered em- tionship in mind: the higher the interest ployees a option “normal retirement” and rate utilized value calcula- “early option. Employees retirement” tion, the produced lower the by electing age to retire at 65 were entitled to calculation.) statute, Under the receive a normal annuity con- capped was rate at a set level specified sisting payments monthly the Pension Guaranty Benefit Corporation. starting at age 65 and continuing until the This rate —the technical derivation of death. retiree’s The second option was which need not concern us here —is com- designed provide to early incentive for monly called the “PBGC rate.” The statu- by offering employees salaried tory cap meant employees that TRW elect- who ages retired between 60 and 65 the ing early to take their retirement benefits annuity, same monthly pay- the same in a payments would receive ments, starting immediately on retirement. substantially greater in amount than the to n which (In addition, slightly payments monthly reduced would have been payment was offered entitled under the employees originally to who writ- 60.) ten.2 ages retired between and Because the level of benefits for retirees was Equity Retirement Act provid- also (or sufficiently lowered was not low- ed that early retirement subsidies such as ered) to up make increase those offered the TRW sub- were

length of time payments over which would ject to an “anti-cutback” rule embodied them, the total pension made lifetime ERISA and the Internal Code. Revenue benefit available to retirees was The prohibits anti-cutback rule the amend- greater than the'' total lifetime benefit pension ment of plans in a way such as to 98-397, (1984) 1. No. Pub.L. 98 Stat. actively might open question. seem See 203(e)(2) (amending §§ 205(g)(3), Prods., and Landgraf v. USI Film 511 U.S. 1053(e)(2) §§ 29 U.S.C. 1055(g)(3), and (1994). 114 S.Ct. 128 L.Ed.2d 229 (26 U.S.C.) 1) 1(a)(1 §§ I.R.C. 417(e)(3)). 41 challenged constitutionality has not application the retroactive newly- adopted cap, rate we face, proposition On its Congress opinion way intimate on no this issue one presume abrogate and did could the settled the other. expectations contracting parties retro- Act.) The and ERISA also Reform Code already that have rights reduce benefit could not distribute a provided 204(g), 29 U.S.C. See ERISA accrued. U.S.C.) (26 partici- in a sum without benefit I.R.C. 1054(g), if over (1984).3 the benefit was 411(d)(6) pant’s consent $3,500.5 22, 1986, the Tax Reform October As of ballooning effect of the Because of the retroactively the inter- raised

Act of 19864 Equity Act on retire- Retirement ceiling where vested est rate (or (calculated sum distributions so specified in a manner surmise), eventually statute) $25,000. decided elim- The new exceeded subsidy where any early retirement per- inate was ceiling for such distributions (The payment form was cho- amended rate. cent the PBGC implemented This for distribu- sen. decision ceiling i.e., PBGC — adopted December $25,000 amendments or less and tions of important, as we critically exceeding 1986—a date for distributions the PBGC rate see, “§ to the resolution of the case now 1139 shall $25,000 commonly called the —is before us. rate,” of the Tax after the relevant section 417(e)(2) (3) pro- Specifically, § I.R.C. and captioned of ac- 204(g), § "Decrease 3. ERISA plan,” through amendment of vided as follows: benefits crued part provides pertinent as follows: “(2) may in excess distribute benefit "(1) participant accrued benefit of The $3,500 only with consent.—If— of by plan may be decreased an not (A) qualified joint present value of the the plan.... the of amendment annuity qualified or the and survivor (1), (2) purposes paragraph For of preretirement annuity survivor exceeds which has the effect of— n amendment $3,500, and reducing (A) eliminating an or (B) spouse participant and the of retirement-type sub- or a benefit tirement (or participant participant where the has (as regulations), or sidy defined in died, surviving spouse) consent (B) eliminating fit, optional of bene- form distribution, writing to the plan may immediately distribute respect attributable to ser- to benefits annuity. present of value such be treated the amendment shall vice before (3) present value.— of Determination In the case reducing accrued benefits. as (A) para- general. purposes of preceding retirement-type subsidy, —For (1) (2), present value shall graphs and apply only with to a shall sentence (either calculated— participant before who satisfies amendment) (i) greater by using rate no preamendment an interest after subsidy....” applicable interest rate if than conditions rate) corresponding (using Internal section such The vested benefit Code, 411(d)(6), $25,000, § denies 26 U.S.C. Revenue and in excess of not plan amended in treatment to a (ii) greater tax using favorable no an interest rate framed anti-cutback rule violation applicable inter- of the than 120 essentially the same terms. ex- accrued benefit est if the vested $25,000 (as determined under ceeds 2085, 1139, 100 Stat. No. 99-514 4. Pub.L. (i)). clause 203(e)(2) (1986), §§ codified at 2487 present value deter- In no shall event 1053(e)(2) §§ 205(g)(3), U.S.C. 29 (II)[sic] be less subclause mined under U.S.C.) (26 (1988) 1055(g)(3) and I.R.C. $25,000. 417(e)(3) (1988). l(a)(l 1)(B) §§ (B) purposes Applicable interest rate. —For of ERISA the I.R.C. sections above-cited (A), 'applicable subparagraph the term Protec- the Retirement were later amended the interest rate which means interest rate' 103-465, Pub.L. No. tion Act of (as date of the used distri- would be Act, however, (1994). did not That Stat. 5038 Guaranty bution) Benefit by the Pension July date applicable until 1996—a become determining purposes Corporation for which, closing coincidentally, is the date lump present of a sum distribu- value membership class. in the plan termination.” tion on have representatives and TRW The class amended) (since parallel provision gov- ERISA's statutory provisions agreed that the older 1055(g)(3). at 29 U.S.C. was codified case. ern this amendments, benefits,” With the December 18 crued a term that according to January which were made retroactive to meant unsubsidized benefits. provided in TRW’s retirement This rejected Id. at 978. TRW’s part relevant as follows: First, arguments two-part in a analysis. pres- noted, “The sum shall be the a Treasury Department regula monthly single ent value of the life annu- 1.411(a)- tion codified at 26 C.F.R. ity (excluding any early retirement sub- 11(a)(2) required that the any amount of sidy) Participant to which the would accrued benefit be calculated in accor except have been entitled for the elec- prescribed dance with valuation rules that payment. tion of the sum form of contemplated use of the 1139 rate. shall include the Costantino, Second, 13 F.3d at 979. anticipated value Posb-Retire- regulation required the subsidized Adjustments which would have early retirement benefit be treated as an Participant been made had elected purposes accrued benefit for of the anti- monthly payments.” TRW Salaried regulation, cutback rule. Id. The Costan- Plan, 5.9(b)(i), Pension Section declared, that, tino “expressly requires amended (emphasis December plan provides where a that a supplied).6 distribution of a subsidized retire The elimination of the early retirement ment benefit is option, available as an subsidy gave rise to the class section 1139 interest rate applied must be action in which we issued the decision re- to calculate the value of the distribution.” TRW, Inc., ported as Costantino Costantino, regulation, Id. And the said F.3d 969 The Costantino “treats subsidized benefits ifas were class was made up employees who accrued purpose benefits” for the of “lim had taken retirement between Janu- iting employer’s ability to distribute 1, 1985, 22, 1986, ary October and who benefits appropriately without calculating lump had elected to sum receive distribu- the any value of subsidies.” Id. tions. It was claimed on behalf of this Turning bar, to the case at we note that class that the retroactive amendments Rybarczyk Richard represents a 18, 1986, adopted on December violated class of TRW retirees who retired between 2, the quoted anti-cutback rale in note 23, 1986, 1, October July 1996. Plain- supra. tiffs Minoru Mizuba and William Ritten- TRW argued Costantino that the house represent a class retirees who amendments had not reduced the benefit 1, 1989, retired January July between held, terms of real dollars. This court 1, 1996. The two classes have been regardless of the dollar merged purposes of the lawsuit. All distribution, amount of the sum merged members of the class have re- prohibited anti-cutback rale elimination of ceived sum distributions of more subsidy for a retiree $25,000. already who had qualified subsidy. Costantino, 13 F.3d at 977-78. The members of this class were benefi- argued

TRW also in Costantino that ciaries plan certain amendments the rate cap applicable only 24, 1988, adopted by to “ac- TRW on Oct. retroac- 6. provided, The amended year. also as to dis- dar The amended contained an tributions with to 1985 and provision regarding almost identical interest the interest rate for distributions not exceed- thereafter, years rates for the except 1987 and $25,000 ing be the PBGC rate at the yould that the PBGC rate would be the one in effect beginning year, of the calendar while for dis- during the month of distribution. TRW Sala- $25,000 tributions over the interest Plan, 5.9(b)(iii)(B) (C), §§ ried Pension would Moody's lesser of the Aaa rate or amended December beginning 1139 rate at the of the calen- prejudg- 1985. Insofar as The district court also awarded tive to Jan. $25,000 plaintiffs to the at a rate more than were con- payments of cerned, determined accordance with the follow- called for the 1988 amendments formula: ing Aaa Moody’s alternative calculations: applied to be to the subsidized rate was (a) greater of interest at a rate “[T]he benefit, and 120 early retirement equal coupon yield equiva- to the issue applied rate was to be to the of the PBGC (as Secretary lent determined benefit, unsubsidized Treasury) average accepted payment with the amount of the price fifty- auction for the last auction of calculation being determined Treasury two week United States bills give employee larger would immediately prior settled to the date of the 1988 Notwithstanding benefit.7 initial sum distribution to the yielded generous lump more amendments member, compounded annually, class payments provided than those (b) equal to the rate of return the version of the effect actually principal earned on the amount amendments, contend during underpayment any that use of the rate under judgment period.” Rybarczyk, 1997WL provi- circumstance violates the relevant *11, at 1997 U.S. Dist. LEXIS sions of ERISA and the I.R.C.8 13848,at *15-*16. summary judgment

In to the granting present appeal, challenges plaintiffs, the district relied on the district use of collateral both court’s estoppel. of collateral doctrine Costanti- and the in- estoppel court’s no, court, “clearly said the district had terest rate formula. applies

held that whenever a calculates the value of subsidized II TRW, Inc., Rybarczyk benefits.” *7, Dist. WL 1997 U.S. LEXIS A (N.D.Ohio 1997). Therefore, 3186, at *23 concluded, could the district court estoppel, The doctrine of collateral ... that the law allows it longer “no assert explained, precludes as the district court the value of a subsi- to calculate party relitigating from issues resolved § using benefit without dized prior proceeding. in a against party very arguments Shore, rate. TRW raised these Co., Inc. v. Hosiery See Parklane Costantino, 322, 645, Circuit and before Sixth 439 U.S. 99 S.Ct. 58 L.Ed.2d Id., (1979). against it.” the Sixth Circuit ruled collateral If the benefit of the *8, at Dist. estoppel 1997 129296 WL 1997 U.S. doctrine is to be claimed success fully, LEXIS at *27. 402(a). provi- § plan der I.R.C. Because ERISA

7. The retained the distinction between (for years deliberately designed parallel 1985 and 1986 which the PBGC sions beginning I.R.C., however, rate was set at the calendar those we shall treat the (for year) years 1987 and 1988 which plaintiffs' arising claims as under ERISA PBGC rate was set at the month of distribu- tion). brought pursuant right-of-ac- as to ERISA’s § provision, 1132. See Counts tion 29 U.S.C. Serv., Inc., F.2d Water & Oil Kissack plaintiffs persistently characterize their 8. The (10th Cir.1993). n. 1 We also alleging (e.g., claims as violations of the I.R.C. provides regulations note that ERISA 417(e)). Technically, 26 U.S.C. violations Treasury Department promulgated by the merely of the Code result in the loss of 410(a), pursuant §§ and 412 are to I.R.C. treatment, including employer's ferred tax applicable parallel provisions to the deemed deduction for contributions I.R.C. 1202(c). 29 U.S.C. of ERISA. 401(a) employees’ and the tax deferral un- “(1) pres- issue in the precise raised entitled to avail themselves of the collater- estoppel ent case must have been raised and al doctrine.

actually litigated prior proceeding; in the (2) issue must determination have B necessary been to the outcome of the inapplicability The of collateral estoppel prior proceeding; automatically does not mean that TRW (3) prior proceeding must have re- parties’ wins. must still examine We merits; sulted in a final on the arguments light of the Costantino deci- (which sion has effect under precedential (4) party against estoppel whom decisis) the doctrine of stare and the rele- sought must full op- have had and fair vant regulations. federal law and portunity litigate the issue in the prior proceeding.” United States v. make much of the state- Corp., Sandoz Pharmaceuticals 894 ment in Costantino that 26 C.F.R. 1.411(a) 11(a)(2) F.2d 826-27 “expressly requires that, plan provides where a lump that a requirements, The first of these distribution of a subsidized it, we see has not been at met the case option, tirement benefit is available as an bar. TRW asserted in Costantino the section ap- 1139 interest rate must be regulations require did not use of the plied to calculate the value of the distribu- § 1139 rate for subsidized benefits under Costantino, tion.” 13 F.3d at 979. TRW’s plan the 1986 amendments inasmuch as response is that the does not offer adoption of the amendments meant option “lump of a sum distribution of a did not offer a subsidized subsidized retirement benefit.” Be- sum as an option. The Costantino amendments, rather, fore the 1988 responded that while TRW’s assertion offered a sum distribution of the true, “may be it is not relevant unsubsidized benefit calculated case, qualified which Plaintiffs PBGC rate —and the 1988 amendments their subsidies to the 1986 merely added an alternate calculation Costantino, amendment.” 13 F.3d at 979. method which the ap- rate is bar, however, at the case plied to the subsidized level of benefit. presumably class is up largely, made if not calculation, This alternate in TRW’s sub- entirely, people who did not take mission, op- does create a stand-alone retirement until after the 1986 amend tion of a sum distribution of the ments. This class thus includes retirees subsidized benefit. option entails the who assert that qualified for subsidies se, election of a per sum distribution partially least on the strength of service after the sum distribution is performed after the 1986 amendments. selected plan present does the alternative extent, obviously, To that this case does calculation methods. not “precise involve the in issue” decided Costantino.9 points further to TRW this court’s defi- Costantino, moreover,

In nothing much “optional nition of form of benefit” Ross turned on the 1988 amendments. v. Pension Plan Hourly Employees for present case, contrast, Indus., (6th plaintiffs Cir.1988), SKF 847 F.2d 329 (if all) most concentrate not of their meaning fire on as a that benefit “involves the so, the 1988 being amendments. That power we or of an right employee to choose persuaded are not plaintiffs that the way payments in which due to him 9. We attempts note that TRW provisions." Ry- to draw a dis- not even invoke those Mr. tinction between barczyk Costantino and this case did invoke ERISA’s anti-cutback rule ¶ ground complaint, Costantino involved ERISA’s in 23 of his class action plaintiffs anti-cutback rule while here the "do so this distinction will not wash. prescribed only application Id. where applied.” made or plan a will be under yielded do argues larg- that the rate to that benefit a TRW Moody’s at 333. choose a “power right” lump er sum than the retiree would have have the for once a payment; sum received under the 1986 edition of the subsidized sum distri- plan, retiree has chosen in which the 1139 rate had to be given bution, rather, “automatically de- plan to the unsubsidized retirement an- applied solely amount based payment nuity termines benefit. The 1988 amendments ap- rate upon whether Section some merely provided possibility amount, unsubsidized the standard plied early cake—and icing on the retirement applied to a subsidized ERISA, or the nothing are aware of we amount, yields larger amount.” Code, regulations fairly or the that can problematic a bonus said to make such does Finally, stresses that ERISA TRW any way. Spe- any particular benefits. not mandate out, nothing cifically, points ignore the anti-cutback Unless pension plans “offer requires § 204(g), rule in ERISA howev embodied early pay- sum retirement subsidized er, plan amendments would be the 1986 ments.” they elim highly problematic to the extent far as argument seems sound as TRW’s prospect early inated the retirement certainly that until the It is true goes. payments sum calculated on the ba amendments liberalized annuity of subsidized benefits attribut sis retirees, early benefit calculation the date performed able to service before provide did not plan version of the 1986) (December 18, on which amend of subsidized bene- lump sum distributions The anti-cutback adopted. ments were fits; on offer to an only lump (which 2, supra) in note quoted rule is early under the 1986 retiree amending from its clearly barred TRW value of the based on the way as to retirement such a reduce unsubsidized) (ie. an- retirement normal early benefits “attrib retirement setting aside the anti- nuity benefit. And before the amend utable to service moment, we see abso- cutback rule for the all the retirees in ment. ...” Most or applica- lutely nothing wrong this. us here must have had the class before say, Treasury regulations Department ble to a mix of accrued what would amount unambiguously, benefits, part being early retirement “if a subsidized provides to service rendered before attributable speci- annuity retirement benefit December was amended on ben- single fies that the sum distribution to service ren part being attributable age efit available retirement nothing Although date. dered after that value the normal retire- from 204(g) prevented in ERISA annuity benefit, then the normal to posi-De attributable reducing benefits annuity is used service, attrib accrued benefits cember 18 of this apply requirements the valuation had to 18 service pre-December utable to resulting amount of the section and the And, § 204(g), remain inviolate. available at single sum distribution pre-December benefits attributable 1.411(a)- age.” 26 C.F.R. age whether the remain inviolate service 11(a)(2) (emphasis supplied). or after the satisfied “before condition be cal- of the benefit With the liberalization amendment....” course, 1988, of the culation formula 8, Ry- supra, in n. Mr. As mentioned possibility that the sub- plan introduced paragraph 23 this issue annuity barczyk raised early benefit sidized retirement Paragraph complaint. action But of his class a role in the calculation. play would follows: 23 reads as subsidized benefit such use of the “eliminating reducing “TRW’s Plan violates the anti-cutback has the effect of Code, early provisions of ERISA and the an retirement benefit or a retire- § provides ment-type subsidy_” 204(g), lower sum distributions to 2, participants properly quoted supra. than are at n. And because such a receive, applies right when it the must be having entitled to treated as accrued imper- calculation to an as it is value insofar attributable service be- benefit, amendment, is, excluding the fore the missible extent, subsidy, notwithstanding protected by prohibition tirement con- § permis- 204(g)(1): fact that the calculation tained in uses “The accrued benefit rate.” a participant plan may sible interest of under a not be decreased of amendment Curiously, have ” plan.... clearly That is what the statute press point appeal. failed to this says, clearly logic and that is of our raise an on ap Failure to issue decision Costantino. normally peal would constitute waiver of McCullen, language of the TRW it Brindley that issue. 61 F.3d Here, however, suggests self that the drafters shared our understanding to December question we pure have a of law that cries 1986, early retirement subsidies were sub out for resolution—and in such a situation ject plan, to accrual. Section 5.5 of the considering are foreclosed from example, says that Absher, sum benefit issue. See Dorris v. 179 F.3d (6th Cir.1999) will greater be calculated as the of the 425- 26 (allowing appellate applied rate to the “accrued or consideration of an unbriefed issue that Early subsidized Retirement Benefit” [em a misinterpretation “pure involved of a phasis percent or 120 added] the PBGC law, question of with no material facts applied to the “accrued Normal or being in dispute”). paternalistic Given the By using unsubsidized” benefit. “accrued” ERISA, purposes underlying given as synonyms, provi “subsidized” this the Congressional findings and declaration sion indicates that I, policy set forth in Title subsidized can benefit be accrued. statute, 1001,10 29 U .S.C. we consider particularly this a appropriate case for ex undermined, Our conclusion is not our ercising discretion to address the un it, by as we see the favorable “determina proceed briefed issue. We shall to do so. tion letter” that received from the Act, Tax seen, Reform as we have Internal respect Revenue Service with required TRW to determine the pension plan as amended effec annuity value of the employees January letter, benefits of tive Although this terms, electing “using inter- its “relates to the status of greater est rate no [TRW’s] under the Internal Revenue Code,” if [PBGC] rate vested provision requir ERISA contains a $25,000....” exceeds ing Secretary U.S.C. to accept Labor favor 417(e)(3), quoted n. supra. Under able determination letters “as prima facie rule, right pres- anti-cutback to a compliance by evidence of initial ent value calculation made under this stat- portions with the standards relevant [of 1201(d). utory cap interest rate “with to ERISA].” 29 far U.S.C. As concerned, benefits attributable to service before the rule is anti-cutback howev er, right amendment” is a persuaded must be treat- we are not that the letter is ed as long “accrued” as as the prima anything. amendment facie evidence of 10. One long years employment losing that led considerations to the antici- enactment of ERISA is described in these pated owing retirement benefits to the lack of "despite growth terms: the enormous in such vesting provisions plans....” in such Id. plans[,] many employees [retirement] representations This is so because of the (cid:127) —With to unsubsidized retire- in requesting made to the that TRW IRS ment benefits attributable service “Ap- In an form entitled the letter. IRS amendment, after employees such Employee for Determination for plication are entitled to receive the advantage Plan,” ques- was asked this Benefit of alternative value calcu- any tion: “Does amendment to the prescribed by lation amend- 411(d)(6) any reduce or eliminate section 24, 1988; adopted ments on October (It may protected benefit?” be recalled 411(d)(6) counterpart is the I.R.C. —Each member of the class of the anti-cutback rule contained should awarded judgment for the § 204(g).) response In to this ERISA amount, any, by if which the any whether question as to amendment any the TRW reduced or eliminated sum to which he or she is entitled rule, protected by the anti-cutback exceeds the actually paid. TRW checked box marked “No.” answer,

TRW’s as we have demonstrat- C ed, IRS, however, incorrect. The As to pre- the district court’s of award was entitled to assume that TRW had interest under the formula de- question correctly answered —and scribed at supra, “long recog- we have favorable in- determination based on this nized that may the district court [award assumption correct is entitled to no at sumption validity. interest] its discretion in general equitable princi- accordance with Circuit, moreover, The Second has said ples.” Uniroyal, Ford v. 154 F.3d that a “favorable determination letter indi apply We therefore employee cates that an of discretion” in reviewing “abuse standard plan qualifies for favorable tax treatment the award. by formal meeting requirements 401(a).” I.R.C. Esden v. Bank Bos Among the constraints on a district (2d Cir.2000). ton, 229 F.3d That shape court’s discretion to award of say “adjudication court went on to prejudgment interest an ERISA case is employee’s] rights [an federal the fact that we look with disfavor on courts, not the field offices of the Id. IRS.” simply adopting state law interest rates. Subject qualification at 177. to the is “not an area ‘primarily state carry determination letters a rebuttable ” Ford, concern.’ 154 F.3d at 617. Inter presumption validity, we are constrained punitive, est awards should not be but agree. letter determination does change analysis our the case at bar. “simply compensate beneficiary should money wrong for the lost value of then, summary, brief our conclusion ly him withheld from or her.” Id. is this: question faced the district court —Employees taking early retirement af- case, then, was how best to calcu- this 18,1986, electing ter December money late the “lost interest value of receive their bene- wrongly urges withheld....” sum, in lump fits are entitled to have only appropriate would be either 1139 rate used the determina- that established 1961—a U.S.C. tion of the value of subsidized average rate tied to the 52-week United benefits attributable to service before amendment; Treasury rate for the relevant States bill 986 wrongfully withheld it earned on funds to the PBGC rate a rate linked

period—or unjust by approve § be to of enrichment.” prescribed would in the manner Corp., Aluminum v. Consolidated Sweet a district court’s award upheld haveWe (6th Cir.1990) (quoting F.2d 270 913 interest calculated prejudgment of States, & Southeast Short v. Central Ford, 154 F.3d at 619. § 1961. 28 U.S.C. Fund, 729 F.2d Areas Pension Southwest See, done so as well. courts have Other Cir.1984)). (8th 567, 576 Global Communica e.g., Algie v. RCA (2d Cir.1995) tions, Inc., 956, 960 60 F.3d approving are aware of no decision We here, choice of the a district court’s (upholding used where the formula like the one provid that it grounds § 1961 rate on higher are to receive the plaintiffs likely approximation ed a “closer actually realized 1961 rate or the rate benefits”). unpaid plaintiffs’ on return may formula be although TRW. But this unusual, rep- that it persuaded we are not however, that say, This is not As an of discretion. resents abuse only permissible rate is 1961 noted, rate has already have 1961 court and interest rate. Our prejudgment If that numerous times. rate upheld been prejudg upheld awards of others have also for the higher to be the one prove should prevailing that were tied to ment interest presumably would period, relevant TRW rates, reflecting the de thus what market objecting it. legitimate have no basis for in order to pay have had to fendants would actual rate of return turns out to If TRW’s See, e.g., money at issue. borrow the rate, than the 1961 higher have been Employees v. Wooster Brush Co. EEOC hand, requirement that TRW the other (6th Ass'n, 727 F.2d 579 Cir. Relief merely deprives actual rate TRW pay the 1984) rate); adjusted Katsa (using prime wrongfully on the denied bene- profit of its (2d Cody, 744 Cir. ros v. F.2d instance would the effect fits. neither 1984) testimony that at (“Expert revealed might it have been had the punitive, banking ... other institutions the time court chosen to use a state-law district to borrow at a rate of were the market market higher prevailing rate much than Awarding pre prime plus percent. one Ford, of return. 154 F.3d at 617 rates Cf. prevail judgment accord with (holding Michigan’s state law rate ing rates is consistent with punitive purposes was law”); Mazzola, F.2d Donovan v. case compen- because it was meant to Despite 1232-33 litigation expenses sate the winner for prejudg that an TRW’s claim award rough- market rate of higher than the based on the actual rate of ment interest ly percent). nine unprecedented, return is the Seventh Cir just an upheld cuit seems to have such argues that the district court’s Employees Lorenzen v. Ret. award. See ef- award of interest has the Co., Sperry & Hutchinson confer a amending fect of “to Cir.1990) (“The (7th re F.2d 236-37 participant benefit which no other Plan money belonged tirement held is, argument in our will receive.” This account, Mrs. Lorenzen —held it on her as view, misguided. plaintiffs If the received dispute it that the collateral were. Now in amounts less lump sum distributions over, togeth return it to her must actually to which were those gleaned by er with the fruits that has entitled, entry it”). holding on to with interest amount of the shortfall litigation the end of the would through actually realized Using the interest simply make the whole. This is on the relevant funds seems plan partic- which other unjust “benefit” for appropriate way avoiding enrich- case, participants other ipants ineligible; earlier ment. As we declared equally eligible have allow the Fund to retain the interest would been “[t]o judgment interest had found it neces- cumstances of this case. Plaintiffs are not sary go to to to obtain benefits entitled the post-amendment claim that n wrongfullydenied them. they assert. also argues that the award of I dissent with respect to the award of judgment interest under the formula chal- interest, prejudgment particularly in view lenged here will result a “windfall recov- generous awards heretofore ordered ery for participants.” disagree. We by this court as to retirement benefits If prejudgment the award of interest were deemed to be In the place, accrued. first return, actual lower TRW’s rate of “ERISA does not mandate the award of arguably is TRW that would receive a prejudgment to prevailing plan interest windfall. Because the with which we participants.” Ford v. Uniroyal Pension are concerned in this case is defined Plan, (6th Cir.1998). 154 F.3d It plan, TRW has to contribute may be awarded at the reasonable discre money to enough plan’s fund the defined tion of judge. the district See id. The obligations. If keep TRW were able to purpose any such award is not to punish part of the return wrongfully withheld the employer. See id. at 617. I would funds, it would have to contribute that plaintiffs hold that are more than ade plan’s obligations much less to fund the quately compensated by award under 28 other retirees. U.S.C. and not some other rate. of the district court is Ford, See 154 F.3d at 619. Lorenzen v. paid AFFIRMED in and REVERSED in Employees Sperry Retirement & part, and the case is REMANDED for Co., (7th Hutchinson 896 F.2d 228 Cir. further proceedings not inconsistent with 1990), support cited as for the majority’s opinion. this decision, prejudgment is, my view, readily distinguishable. See Mar WELLFORD, Judge, concurring Circuit v. Security shall State Bank Hamilton part and dissenting in part. (In Marshall), (7th re 970 F.2d I entirely concur my colleague, Cir.1992) Lorenzen). (distinguishing It Nelson, through part II.B Judge of his split was a decision strong and there was a opinion. hold, however, I would that we wrongdoing by overtone of employer should adhere to our procedure usual case, unlike TRW’s role the instant deem that any have waived anti- case. The Lorenzen particularly court was argument appeal cutback this concerned about the welfare and need McCullen, (6th Brindley v. F.3d 507 compensation “full the victim” and his Cir.1995); Holbrook, Wright see also would, widow. I accordingly, conclude 794 F.2d 1152 This case is awarding any not about loss of vested benefits under our beyond that called in 28 U.S.C. ruling pre-December as to provi- was an abuse discretion. plans. sions amended has, indeed, generously dealt with its employees, and I would not stretch our

procedures to consider which plain-

tiffs have failed adequately argue I think

brief. that'the rationale reverse supported by effect the IRS’ approval or “favorable ‘determination let- ”

ter’ issued with plan, to the TRW 1,1989.

amended effective January

In general, I deem Costantino not con-

trolling under differing facts and cir-

Case Details

Case Name: Richard J. Rybarczyk, Minoru Mizuba, and William Rittenhouse v. Trw, Inc. And Trw Salaried Pension Plan

Court Name: Court of Appeals for the Sixth Circuit

Date Published: Dec 21, 2000

Citation: 235 F.3d 975

Docket Number: 97-4167

Court Abbreviation: 6th Cir.