THOMAS G. DAVIS, ET AL., APPELLANTS v. PENSION BENEFIT GUARANTY CORPORATION, APPELLEE
No. 12-5274
United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued September 10, 2013 Decided November 1, 2013
Appeal from the United States District Court for the District of Columbia (No. 1:08-cv-01064)
James J. Armbruster, Assistant Chief Counsel, Pension Benefit Guaranty Corporation, argued the cause for appellee. With him on the briefs were Judith R. Starr, General Counsel, Kenneth J. Cooper, Assistant General Counsel, Kimberly J. Duplechain, Attorney, Israel Goldowitz, Chief Counsel, Charles L. Finke, Deputy Chief Counsel, Paula J. Connelly and Garth D. Wilson, Assistant Chief Counsel, and Joseph Krettek, Attorney.
Before: GARLAND, Chief Judge, ROGERS, Circuit Judge, and WILLIAMS, Senior Circuit Judge.
Opinion for the Court by Circuit Judge ROGERS.
ROGERS, Circuit Judge: Appellants are approximately 1,700 retired U.S. Airways pilots and their beneficiaries (“the Pilots”). They appeal the grant of summary judgment to the Pension Benefit Guaranty Corporation (“PBGC”) on their claims regarding pension benefits payable under the terminated Retirement Income Plan for U.S. Airways Pilots (“the Plan”). Of the Pilots’ twelve claims, three claims are not appealed and four claims that are appealed but were not briefed are forfeited. For the following reasons, upon de novo review, see Stephens v. U.S. Airways Grp., Inc., 644 F.3d 437, 439 (D.C. Cir. 2011), we affirm as to the five remaining claims.
I.
We begin with an overview of the statutory and regulatory scheme and then summarize the factual background and procedural history before turning, in Part II, to the merits of the Pilots’ five claims.
A.
Congress enacted the Employee Retirement Income Security Act of 1974 (“ERISA”) to establish “minimum standards . . . assuring the equitable character of [employee benefit] plans and their financial soundness.”
If a qualified plan has insufficient assets to satisfy its pension obligations the employer can terminate the plan voluntarily or the PBGC can terminate it involuntarily. See LTV Corp., 496 U.S. at 638;
The administrator of a terminated plan distributes assets in accordance with the six tier priority scheme set forth in
in the case of benefits payable as an annuity—
(A) in the case of the benefit of a participant or beneficiary which was in pay status as of the beginning of the 3-year period ending on the termination date of the plan, to each such benefit, based on the provisions of the plan (as in effect during the 5-year period ending on such date) under which such benefit would be the least,
(B) in the case of a participant’s or beneficiary’s benefit (other than a benefit described in subparagraph (A)) which would have been in pay status as of the beginning of such 3-year period if the participant had retired prior to the beginning of the 3-year period and if his benefits had commenced (in the normal form of annuity under the plan) as of the beginning of such period, to each such benefit based on the provisions of the plan (as in effect during the 5-year period ending on such date) under which such benefit would be the least.
For purposes of subparagraph (A), the lowest benefit in pay status during a 3-year period shall be considered the benefit in pay status for such period.
By regulation,
The PBGC also has promulgated regulations regarding how it handles benefit determinations. The PBGC makes initial determinations “with respect to allocation of assets under section 4044 of ERISA [
B.
In 2002, U.S. Airways filed for bankruptcy and requested that its pilots’ benefits plan be terminated pursuant to ERISA’s “distress” termination procedures. See
The Pilots first brought suit in November 2003, challenging the PBGC’s calculation of estimated benefits. On appeal, this court rejected the Pilots’ claims for failure to exhaust administrative remedies. See Boivin, 446 F.3d at 158–59. Later the PBGC issued initial determinations, and the Pilots appealed to the PBGC Appeals Board, which issued the first of several decisions on February 29, 2008. The Pilots challenged the PBGC’s final determinations in the district court in June 2008 on the grounds that the PBGC has misapplied ERISA, misinterpreted the Plan itself, and breached its fiduciary duties to Plan participants and beneficiaries. The Pilots moved for a preliminary injunction in August 2008. In September 2008, the PBGC issued a decision related to some of the Pilots’ disability claims. The district court denied the motion for a preliminary injunction in December 2008, see Davis v. PBGC, 596 F. Supp. 2d 1, 5 (D.D.C. 2008), and this court affirmed, see Davis v. PBGC, 571 F.3d 1288, 1295 (D.C. Cir. 2009). Thereafter the district court granted summary judgment to the PBGC on all but one claim. See Davis v. PBGC, 864 F. Supp. 2d 148, 172 (D.D.C. 2012); see also Davis v. PBGC, 815 F. Supp. 2d 283 (D.D.C. 2011).
II.
The Pilots now appeal nine of the claims stated in their second amended complaint. They have, however, only provided argument in support of five claims. In this circuit, “‘[i]t is not enough merely to mention a possible argument in the most skeletal way, leaving the court to do counsel’s
Turning to the Pilots’ five claims, the court need not resolve the parties’ contentions regarding whether the PBGC is entitled to deference pursuant to Chevron, U.S.A., Inc. v. NRDC, 467 U.S. 837 (1984), when it acts as the trustee in an involuntary retirement plan termination. Regardless of the standard of deference, the Pilots’ claims relating to the PBGC’s interpretation of the statute and regulations must fail. Similarly, the court need not decide the level of deference due to the PBGC’s interpretation of Plan provisions because the Pilots have not demonstrated Article III standing for part of one claim and their other claims fail regardless of the standard. For these reasons we also need not decide whether the decision in Davis v. PBGC, 571 F.3d 1288, regarding the Pilots’ request for a preliminary injunction, is the law of the case on the standard of review, see Sherley v. Sebelius, 689 F.3d 776, 783 (D.C. Cir. 2012).
Claim One concerns whether the benefit increase under U.S. Airways’ Early Retirement Incentive Program (“ERIP”) should be placed in priority category three. This designation is significant because the PBGC has determined that the Plan’s assets cover all Plan benefits through priority category three. The ERIP was adopted on December 4, 1997, had an “effective date” of January 1, 1998, and allowed pilots on a seniority list who would turn forty-five on or before May 1, 2000 to elect to receive the benefit between March 1, 1998 and April 30, 1998. Those who elected to receive the benefit could not receive it before May 1, 1998, less than five years prior to the Plan’s date of termination.
The Board determined that because the earliest date the benefit could be paid was one month after the beginning of the five-year period preceding the date of Plan termination, the ERIP benefit could not be included in priority category three. This is because during that one month period, those pilots who had elected the benefit received a lesser benefit, and
The PBGC concluded that the relevant regulation interpreting the phrase “in effect” in
Claim Two relates to § 7 of the Plan, which caps maximum yearly retirement income by incorporating the annual benefit limit in the Internal Revenue Code,
The Pilots contend that the Appeals Board’s conclusion conflicts with
The PBGC’s analysis tracks the statute. As it explains, the incorporation of the COLAs in § 7.2 of the Plan makes them benefit increases. The “lowest annuity” rule,
Claim Seven involves the calculation of benefits for pilots who could have retired three years before Plan termination but did not. See
The Pilots rely primarily on a reference to “actuarial equivalen[ce]” elsewhere in ERISA,
For purposes of this section, in the case of any defined benefit plan, if an employee’s accrued benefit is to be determined as an amount other than an annual benefit commencing at normal retirement age, or if the accrued benefit derived from contributions made by an employee is to be determined with respect to a benefit other than an annual benefit in the form of a single life annuity . . . commencing at normal retirement age, the employee’s accrued benefit . . . shall be the actuarial equivalent of such benefit
or amount determined under paragraph (1) or (2).
According to the Pilots, this means that the actuarial equivalent of the accrued benefit is nonforfeitable and belongs in priority category three. As support, however, they point to two inapposite cases, Contilli v. Local 705 International Brotherhood of Teamsters Pension Fund, 559 F.3d 720 (7th Cir. 2009), and Stephens v. U.S. Airways Group, Inc., 644 F.3d 437 (D.C. Cir. 2011). Neither case addresses distress terminations, priority category three, or Title IV of ERISA. Contilli, 559 F.3d at 722, dealt with an employee whose retirement payments, which began several months after he retired, were not increased so that his pension would have the same value as if payments had begun at his retirement. Stephens, 644 F.3d at 438, dealt with a similar issue; plaintiffs opted to receive their pension benefits in a lump sum, but wanted interest on the sum in view of the forty-five-day delays from the dates they would have received the first annuity payments and the dates the plan disbursed their lump sum payments.
The Pilots fail to show that the PBGC has not adopted the better interpretation of
Claim Eight involves a dispute over § 4.1(E) of the Plan, which the Pilots refer to as the “minimum benefit provision.” This provision sets a minimum retirement income for pilots who were on a seniority list under the pre-December 1, 1972 plan (the “Prior Plan”) based on benefits they would have received had that plan continued in effect without change. The Pilots contend that the plain meaning of § 4.1(E) confirms that all Prior Plan benefits should be included in the minimum benefit calculation, while the PBGC determined that some should and others should not.
The Pilots’ first point barely merits consideration. If the Pilots wanted the Board to consider the additional documents they should have submitted them. The documents in the Everett case and their relevance were known to the Pilots. The Pilots were represented by counsel throughout the Board proceedings. As to the timing of the Schofield declaration, the Pilots rely on Esch v. Yeutter, 876 F.2d 976, 991 (D.C. Cir. 1989), which allows parties to supplement the administrative record “where evidence arising after the agency action shows whether the decision was correct or not.” But, as the district court noted, see Davis, 815 F. Supp. 2d at 291, the Schofield declaration did not arise after the Board’s decision. The Pilots informed the Board that they had declarations from all the U.S. Airways negotiators who recalled the bargaining over the minimum benefit provision. Even if they did not have a version of the Schofield declaration at the time of the appeal, they knew that declarations of this type would be relevant and they offer no reason why they could not have obtained the Schofield declaration in time to submit it with their appeal to the Board. Hence, it is properly disregarded by this court. As the district court observed in denying the Pilots’ request that it consider documents that were not part of the administrative record before the Appeals Board:
[F]or whatever reason, [the Pilots] did not provide all of the evidence supporting their position with their appeal. The Board . . . chose to act on the evidence before it and not to hold a hearing. The Board did not contravene any regulations by doing so. [The Pilots] may have been legitimately surprised by the Board’s course of action, but [the Pilots’] own choice to withhold evidence at the agency level — whether tactical, labor-saving, or otherwise — does not provide a basis to allow the introduction of extra-record evidence during judicial review.
Davis v. PBGC, 815 F. Supp. 2d at 292. The Pilots criticize the Board for concluding that the additional evidence “could not possibly make a difference,” Reply Br. 20 (emphasis in original), but the Board’s conclusion was more nuanced, explaining that the statements in the affidavit provided to it, and any similar statements in additional affidavits, were insufficient to establish the Pilots’ claims because they conflicted with the provisions of the Plan.
In addressing the Pilots’ four Claim Eight arguments, we therefore look to the Plan and confine our review to the evidence in the administrative record. The Pilots offer the barest of arguments based on the text of the Plan, arguing only that “as a matter of common sense and sound linguistic construction, a Plan provision that promises a benefit ‘no less’ than the benefit provided by the Prior Plan necessarily includes everything that was included in the Prior Plan and does not need to specifically delineate each component.” Appellants’ Br. 51. The PBGC maintains that other language in the Plan reveals that the Plan was not to continue exactly as before.
Reinvested dividends. The Prior Plan included a variable component based on the performance of a group of stocks held by the Prior Plan. The valuation of these stocks included dividends. The new Plan, which did not include this variable component, provided that for purposes of “determining the retirement income to which the Participant would have been entitled” under the Prior Plan, the calculation should assume that if the variable component had survived, its performance would have been “equal to the investment performance of the Standard and Poor’s 500 stock index (unadjusted for dividends).” The Pilots’ position would require the court to ignore this phrase and include dividends in the minimum benefit calculation. To ignore the plain text would clearly be improper, particularly because it appears in the same sentence that preserves the minimum benefits of the pre-1972 plan.
Twice-yearly adjustments. The Pilots maintain that Prior Plan pilots are entitled to twice-yearly adjustments incorporated in the pre-1972 plan to reflect changes in the value of the variable component of that plan. The PBGC determined that the new Plan fixed the minimum benefit amount at a Prior Plan pilot’s benefit commencement date or termination of employment. The minimum benefit provision of the new Plan does not mention twice-yearly adjustments, but instead states that a Prior Plan pilot’s retirement income “shall not be less than the amount to which he would have been entitled at his Benefit Commencement date or Termination of Employment had the Plan continued in effect.” Although “amount to which he would have been entitled” could mean the amount at the time of retirement plus future adjustments, the Plan’s text indicates a fixed amount was intended, stating that the relevant figure is the amount to which one was entitled at a particular moment in time. This limitation appears in the same sentence as text preserving the Prior Plan pilots’ minimum benefits and is a qualification of that statement.
1% termination credit. The Pilots maintain that they are entitled to an “upward adjustment to account for forfeitures to the Plan caused by the termination of service of unvested participants.” Second Am. Cmplt. at 185, Davis v. PBGC, 864 F. Supp. 2d 148 (D.D.C. 2012) (No. 1:08-cv-01064). The Appeals Board found this “1% termination credit,” as the Pilots call it,
50% income supplement for totally and permanently disabled pilots. Here, the Pilots maintain that the PBGC has failed to provide those qualified participants in the pre-1972 plan who became “‘totally and permanently’ disabled” with the Prior Plan’s “50% retirement income supplement.” The Appeals Board found that the new Plan explicitly set forth two formulae for assessing benefits for individuals who were totally and permanently disabled – one for those who began receiving disability benefits on or after December 1, 1974 and one for those who began receiving disability benefits prior to December 1, 1974.
The court does not address this part of Claim Eight because the Pilots have failed to demonstrate Article III standing by showing at least one of them was on the relevant seniority list as of December 1, 1972, and had become totally and permanently disabled within two years after retiring due to a related disability. See Plan § 4.1(E); Prior Plan § 4. In a supplemental brief the Pilots stated that “[a]t least four such Appellants” were “entitled to the 50% disability retirement supplement,” and identified the four by name, but failed to identify the relevant criteria, both eliding the difference between “normal” and “disability” retirement and failing to state that the total and permanent disability must be related to the earlier disability. See Appellants’ Supp. Br. 3 (Sept. 19, 2013); see id. 2. Given the misstatement of the criteria, the Pilots’ identification of “four such [Pilots]” fails to show any Pilot suffered an injury in fact as a result of the PBGC’s determination on the 50% supplement. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 560–61 (1992). The exhibit to which the Pilots point on the question of whether the Pilots’ disabilities entitled them to the 50% supplement at issue is unhelpful because it lists only the names of “Disability Pilots” without indicating whether these Pilots’ disabilities meet the Prior Plan’s criteria. See Appellants’ Supp. Br. 3 (citing Ex. 3 to Decl. of Ronald B. Natalie). In any event, the PBGC responded that the four identified Pilots could not benefit from a favorable ruling on this part of Claim Eight because their current benefits are equal to the Internal Revenue Code
Claim Eleven involves the Board’s September 11, 2008 decision concerning eligibility for and calculation of the Pilots’ disability retirement benefits. The Plan’s disability retirement provision in § 4.1(E) guarantees a minimum amount of basic retirement income to a pilot “who begins receiving disability benefits under the Additional Benefit Programs on or after December 1, 1974, and who is determined to be totally and permanently disabled” (emphasis
The Pilots’ position here rests upon their views of the procedures that must be in place to determine who is totally and permanently disabled, and the participants or beneficiaries who are covered by the disability provision in § 4.1(E). On procedures, the Pilots describe (without providing a record citation) a 1980 amendment to “the Plan” that fundamentally changed the way disability determinations were made. According to the Pilots, these changes meant that pilots were no longer required to secure a formal Social Security Administration (“SSA”) determination of total and permanent disability but instead could seek an initial determination of total and permanent disability from U.S. Airways and, if unsuccessful, a new determination from either a medical examiner or the U.S. Airways Retirement Board. Consequently, the Pilots conclude that the PBGC must provide a similar alternative mechanism for obtaining a determination of total and permanent disability.
The PBGC points out that the changes to which the Pilots refer are part of the Disability Plan, rather than the Retirement Income Plan. The Disability Plan, not the Retirement Plan, governs total and permanent disability determinations and it is ongoing and administered by U.S. Airways. See Appellee’s Br. 56-57. The PBGC states that it is continuing U.S. Airways’ long-established practice of deferring to the plan administrator of the Disability Plan for disability determinations. See id. 56. More significantly for our purposes, the PBGC states that the Pilots can demonstrate no legal basis for imposing obligations on the PBGC based on provisions of the Disability Plan because it administers only the Retirement Plan. In fact the Pilots fail to cite a legal basis on which the court could conclude that the PBGC was required to continue the pre-termination practice as part of its responsibilities in administering the Retirement Plan. Their assertion that “there is absolutely no evidence that the Disability Plan is resolving or would resolve disputes involving pre-termination disabilities,” Reply Br. 25, lacks support in the record and in rebuttal oral argument they never challenged the statement by PBGC’s counsel that before the Plan terminated, all disability determinations were made under the separate Disability Plan, which still exists today, see Oral Arg. at 53:02 (Sept. 10, 2013). By contrast, the PBGC’s argument, including that the Pilots could have gone back to the Disability Plan to get a determination, was met by the Pilots’ rebuttal acknowledging that the Disability Plan still exists, but asserting that under prior practice it was a gatekeeper and after going to the Disability Plan pilots could go to the Retirement Board (which no longer exists) or to a medical examiner (which the PBGC does not allow). Therefore, they argued, their only option is an SSA determination. Still, this response does not explain why it should be up to the PBGC, rather than the Disability Plan administrator, to permit a medical examiner to find total and permanent disability, or why it is inappropriate for the PBGC to defer to the Disability Plan administrator on this question concerning interpretation of the Disability Plan.
With regard to the identification of which pilots are eligible for the basic retirement income guarantee, § 4.1(E) provides that it is available “to a Participant who begins receiving disability benefits under the Additional Benefit Programs on or after December 1, 1974, and who is determined to be totally and permanently disabled” (emphasis added). The PBGC reads this provision as a two part test: to qualify, the pilot must be determined to be
Accordingly, we affirm the judgment of the district court granting summary judgment to the PBGC on the five claims before this court.