726 F.2d 839 (D.C. Cir. 1984), 83-1079, Belland v. Pension Ben. Guar. Corp.

Docket Nº:83-1079.
Citation:726 F.2d 839
Party Name:Priscilla BELLAND, et al., Appellants v. PENSION BENEFIT GUARANTY CORPORATION, a Federal body, et al.
Case Date:February 03, 1984
Court:United States Courts of Appeals, Court of Appeals for the District of Columbia Circuit

Page 839

726 F.2d 839 (D.C. Cir. 1984)

Priscilla BELLAND, et al., Appellants



No. 83-1079.

United States Court of Appeals, District of Columbia Circuit

February 3, 1984

Argued Oct. 28, 1983.

Page 840

Appeal from the United States District Court for the District of Columbia (D.C. Civil Action No. 79-1248).

James R. Treese, Alexandria, Va., for appellants.

Eugene B. Granof, Washington, D.C., for appellee Georgia Pacific Corp.

Paul E. Freehling, Chicago, Ill., with whom John D. Heckert, Washington, D.C., was on brief, for appellee Brown Co.

James N. Dulcan, Washington, D.C., for appellee Pension Ben. Guar. Corp.

Leonard Appel, Washington, D.C., entered an appearance for appellee United Paperworkers International Union.

Before TAMM, WALD and STARR, Circuit Judges.

Opinion for the court filed by Circuit Judge TAMM.

Opinion dissenting in part filed by Circuit Judge WALD.

TAMM, Circuit Judge:

On May 7, 1979, appellants brought this action in district court seeking to recover certain pension benefits. Appellants alleged that the federal agency, Pension Benefit Guaranty Corporation (PBGC), was arbitrary and capricious in deciding that their pension plan was not eligible for federal insurance coverage under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. Sec. 1461(b)(2) (Supp. V 1981). They also alleged that their former employers, Brown Company (Brown) and Georgia-Pacific Corporation (Georgia-Pacific), breached contractual promises by reducing appellants' pension benefits.

United States District Judge Norma Holloway Johnson entered judgments in favor of PBGC, Brown, and Georgia-Pacific. Belland v. PBGC, No. 79-1248 (D.D.C. June 30, 1981 & Dec. 30, 1982). Appellants challenge those judgments on appeal. For reasons expressed herein, we affirm.


  1. The Reduction of Pension Benefits

    Appellants comprise about 253 individuals who, until the summer of 1971, were employees of Brown at a paper products manufacturing

    Page 841

    plant in Portage, Michigan. Joint Appendix (J.A.) at 911. In June 1971, Brown sold the Portage plant to Georgia-Pacific. Appellants remained at the Portage plant and became Georgia-Pacific employees.

    While working for Brown, appellants had participated in the Brown Company Pension Plan No. 1 (Brown Pension Plan). Because appellants, upon becoming Georgia-Pacific employees, would no longer accrue benefits under the Brown Pension Plan, the two companies provided for appellants' pensions in the purchase and sale agreement for the Portage plant. In article 7(b)(i) of the agreement, Georgia-Pacific agreed to enter into collective bargaining with appellants' representatives to substitute for the Brown Pension Plan either a new or an existing Georgia-Pacific plan. 1 In article 7(b)(ii), Georgia-Pacific promised to strive during collective bargaining to obtain retirement benefits for appellants comparable to benefits provided by the Brown Pension Plan. In article 7(b)(iii), Brown agreed to transfer to Georgia-Pacific appellants' pro rata share of money in the Brown Pension Plan, and Georgia-Pacific agreed to apply this transferred money to appellants' new pension plan.

    Georgia-Pacific entered into a collective bargaining agreement with appellants in June 1971. J.A. at 1088-89. The agreement provided that appellants would participate in the Georgia-Pacific Midwestern Joint Pension Trust (Georgia-Pacific Pension Plan), which provided benefits comparable to the Brown Pension Plan. 2 Id. at 926 n. *. In February 1972, the parties amended the Georgia-Pacific Pension Plan to make benefit reductions mandatory when fund assets became insufficient. 3

    In March 1974, Georgia-Pacific announced that the Portage plant would be closed by June 30, 1974. J.A. at 593. By June 30, 1974, all production at the plant had ceased, and only two employees remained. Id. These two employees were terminated after completing plant closure between July 1 and July 3, 1974. Id. at 33, 593.

    With plant closure came the cessation of contributions to the Georgia-Pacific Pension

    Page 842

    Plan. The pension plan trustees determined that existing pension plan assets would not be sufficient to pay appellants the amount provided by the plan. Accordingly, in compliance with the plan, supra note 3, the trustees in March 1975 reduced appellants' pension benefits from six dollars per month per year of service to one dollar and fifty cents per month per year of service. J.A. at 912. Appellants received immediate written notification of the pension benefit reduction. Id. at 917.

  2. Appellants Apply to PBGC for Pension Plan Insurance Coverage Under ERISA

    Congress established PBGC on September 2, 1974 to administer the pension plan insurance provisions of ERISA. 29 U.S.C. Sec. 1302 (1976). ERISA provides a comprehensive insurance program for certain pension plans that terminated on or after September 2, 1974. Id. Sec. 1461(a). ERISA also provides retroactive insurance coverage for certain pension plans that terminated between July 1 and September 1, 1974. Id. Sec. 1461(b). This retroactive coverage period commonly is called the "window period." Congress expressly tasked PBGC with determining whether a plan seeking window period coverage terminated during the window period. Id. Congress established two tests for making this determination: PBGC "shall make the determination on the basis of the date on which benefits ceased to accrue [the "ceased to accrue" test] or on any other reasonable basis consistent with the purposes of this subsection [the "other reasonable basis" test]." Id.

    On September 13, 1974, appellants applied to PBGC for pension plan insurance coverage under the window period provision of ERISA. J.A. at 593. PBGC applied the "other reasonable basis" test and, based upon the de minimis participation by appellants in the plan after June 30, 1974, concluded that the plan terminated before July 1, 1974. Accordingly, in June 1975, PBGC notified appellants that the Georgia-Pacific Pension Plan was not eligible for window period coverage. Id.

    In December 1975 and June 1976, PBGC reviewed its decision that appellants' pension plan terminated before July 1, 1974. J.A. at 593. Appellants, assisted by their union and by Georgia-Pacific, submitted additional factual materials to PBGC. Id. at 55, 65, 68. PBGC nevertheless affirmed its earlier decision. Id. at 593. In October 1977, PBGC determined the case should not be reopened. Id. at 131.

  3. The District Court Decision

    On May 7, 1979, appellants filed the instant action against PBGC, Brown, and Georgia-Pacific. Appellants alleged that PBGC improperly denied window period pension coverage under ERISA. Appellants argued that PBGC was arbitrary and capricious in its interpretation and application of section 1461(b). J.A. at 593-94. Alternatively, appellants argued that PBGC violated the Administrative Procedure Act, 5 U.S.C. Secs. 551-559 (1982), because it failed to promulgate rules governing the eligibility of pension plans seeking window period coverage. J.A. at 594. On June 30, 1981, the district court entered summary judgment for PBGC. Belland v. PBGC, Civ. No. 79-1248 (D.D.C. June 30, 1981).

    In their complaint against Brown and Georgia-Pacific, appellants alleged that both companies breached oral promises that appellants would receive pension benefits of six dollars per month per year of service. J.A. at 914. Appellants also argued that Brown and Georgia-Pacific breached the purchase and sale agreement for the Portage plant by allowing the substantial reduction of pension benefits. Id. On December 30, 1982, the district court entered summary judgment for Brown and Georgia-Pacific. Belland v. PBGC, Civ. No. 79-1248 (D.D.C. Dec. 30, 1982).

    This appeal followed.


  4. Appellants' Claims Against PBGC

    1. PBGC's Interpretation of Section 1461(b)

    Appellants contend that PBGC's decision to deny insurance coverage based exclusively

    Page 843

    on its application of the "other reasonable basis" test was arbitrary, capricious, and an abuse of discretion. Appellants stress that the purpose of ERISA is to provide relief for employees who otherwise would lose their pension benefits. In light of the remedial purpose underlying ERISA, appellants argue that section 1461(b) must be construed to provide expansive relief. Appellants therefore contend that section 1461(b) requires PBGC to apply the "ceased to accrue" test and allow window period coverage when, as here, any pension benefits accrued during the window period. If no pension benefits accrued during the window period, appellants contend that PBGC still has discretion to extend coverage pursuant to the "other reasonable basis" test. Because PBGC allegedly ignored the "ceased to accrue" test and relied exclusively on the "other reasonable basis" test, appellants argue that PBGC was arbitrary and capricious in its interpretation of section 1461(b).

    We are not persuaded by appellants' argument. PBGC's interpretation of ERISA is entitled to great deference. See United Steelworkers of America v. Harris & Sons Steel Co., 706 F.2d 1289, 1296 (3d Cir.1983); Concord Control, Inc. v. International Union, UAW, 647 F.2d 701, 704 (6th Cir.), cert. denied, 454 U.S. 1054, 102 S.Ct. 599, 70 L.Ed.2d 590 (1981); Connolly v. PBGC, 581 F.2d 729, 730 (9th Cir.1978), cert. denied, 440 U.S. 935, 99 S.Ct. 1278, 59 L.Ed.2d 492 (1979). We do not rely solely on great deference here, however, because PBGC's interpretation of section 1461(b) was consistent with the plain language of ERISA.

    Our starting point for determining whether PBGC properly interpreted section 1461(b) is, of course, the language of the...

To continue reading