Adams v. Pension Ben. Guar. Corp., CIV.A. 02-0945(RCL).
| Decision Date | 25 August 2004 |
| Docket Number | No. CIV.A. 02-0945(RCL).,CIV.A. 02-0945(RCL). |
| Parties | Allen D. ADAMS II, et al., Plaintiffs, v. PENSION BENEFIT GUARANTY CORPORATION, et al., Defendants. |
| Court | U.S. District Court — District of Columbia |
David S. Dessen, Dessen, Moses & Sheinoff, Philadelphia, PA, for Plaintiffs.
Andrea Margaret Wong, Andrew Tanner Karron, David P. Gersch, John Daniel Daley, Arnold & Porter, LLP, Washington, DC, for Defendants.
This matter comes before the court on defendant Pension Benefit Guarantee Corporation's ("PBGC") and defendant Pichin's motions to dismiss plaintiffs' First Amended Complaint. Defendants move to dismiss this action pursuant to Federal Rule of Civil Procedure 12(b)(6) on grounds that the complaint fails to state a claim upon which relief may be granted. Plaintiffs submitted memoranda in opposition, and the defendants filed replies to plaintiffs' oppositions. Upon consideration of the parties' filings, the relevant law and the facts of this case, this Court finds that the defendants' motions to dismiss should be GRANTED in accordance with this memorandum opinion.
This case arises under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq. The plaintiffs, retired airline pilots seek declaratory and injunctive relief based upon the termination of Trans World Airlines's ("TWA") pilot retirement plan ("Pilots' A-Plan"). Specifically, plaintiffs assert that portions of a Comprehensive Settlement Agreement ("CSA") between TWA, the TWA pilots' union, the financier Carl Icahn and various entities associated with Icahn (the "Icahn entities"), including defendant Pichin Corporation, and the PBGC comprise a transaction to evade liability under ERISA. Plaintiffs also assert that both the Pichin Corporation ("Pichin") and the PBGC breached their fiduciary duties owed to the participants and beneficiaries of the plan.
In January 1992, TWA filed for Chapter 11 bankruptcy in the United States Bankruptcy Court for the District of Delaware. At the time of the 1992 bankruptcy petition, there were two identified pension plans covering TWA's employees ("the pension plans"). One, the Pilots' A-Plan, covered pilots and the other covered most other TWA employees. Pls.' First Am. Compl. ¶ 30. According to plaintiffs, there were unfunded benefit liabilities for the pension plans in the amount of $1.124 billion at the time of the bankruptcy proceeding. Of this liability, $444,700,000 was attributable to unfunded benefit liabilities for the Pilots' A-Plan. Id. ¶ 31. In or around October of 1992, PBGC announced its intention to terminate TWA's pension plans. In order to postpone or prevent termination of the plans, all parties agreed upon the terms of the CSA. The CSA provided, inter alia, that:
(1) Icahn would loan TWA $200 million; (2) Pichin would sponsor the pension plans instead of TWA. Thus, Icahn became responsible for making the minimum funding contributions and TWA was released from all liability for the plans; (3) TWA was to issue $300 million in notes to make part of the annual pension plan contributions in compliance with ERISA and provisions of the Internal Revenue Code; (4) PBGC would not terminate the plans except under ERISA § 4042(a)(2), 29 U.S.C. § 1342(a)(2) or at the request of the Icahn sponsor; (5) PBGC would, at Icahn's request, terminate the plans if a "Significant Event," as defined in the CSA, occurred, and (6) that in the event of a Significant Event requiring termination, Icahn's liability to PBGC would be limited to $240 million.
See Allied Pilots Ass'n v. PBGC, 334 F.3d 93, 96 (D.C.Cir.2003) (emphasis in original) (quoting Air Line Pilots Ass'n v. PBGC, 193 F.Supp.2d 209, 213 (D.D.C.2002)); Plaintiffs' First Amended Complaint ¶¶ 37-47. The bankruptcy court approved the CSA as part of TWA's Chapter 11 reorganization plan on December 30, 1992. See In re Trans World Airlines, Inc., No. 92-115 (Bankr.D.Del. Dec. 30, 1992). With the CSA in effect, the pension plans remained in existence and TWA continued in operation for an additional eight years. During that time, Pichin acted as the sole plan sponsor and contributing sponsor for the purposes of ERISA and the Internal Revenue Code.1
The pension plans were ultimately terminated effective January 1, 2001 after PBGC received notice from Pichin that a defined "Significant Event" had occurred. The PBGC, after termination of the pension plans, estimated that the Pilots' A-Plan alone was underfunded by approximately $200 million.2 In accordance with the CSA, Pichin's termination liability under both TWA pension plans consisted of $240 million to be paid in eight annual payments of $30 million.
Following the termination of the plans, the Air Line Pilots Association, International ("ALPA") and two individual pilots filed suit in this court against PBGC and Pichin. The plaintiffs in that suit claimed that the PBGC had exceeded its statutory authority by terminating the Pilots' A-Plan based on the terms of the CSA, rather than based on ERISA's criteria for involuntary terminations. On cross-motions for summary judgment, the district court held that the neither the termination nor the CSA itself violated ERISA and therefore, actions taken by the PBGC to terminate the Pilots' A-Plan were not unlawful under ERISA.3
The pilots appealed the district court's decision under the representation of the Allied Pilots Association ("APA").4 On appeal, the pilots argued (1) that the PBGC failed to make an administrative determination in 1992 that the TWA pension plans satisfied ERISA's involuntary termination criteria and (2) that even if the PBGC made a proper determination in 1992, it acted arbitrarily and capriciously by failing to make a second such determination in 2001 before formally terminating the plans. Allied Pilots Ass'n, 334 F.3d at 97.
The D.C. Circuit affirmed the district court's decision and concluded that the CSA was lawful under ERISA and that the CSA mandated the PBGC's termination of the pension plan upon the occurrence of a Significant Event. In addition, the court held that ERISA authorizes the PBGC to (1) enter into settlement agreements like the one challenged in this case and (2) postpone termination pending the occurrence of a defined event. The court further concluded that PBGC had not acted arbitrarily or capriciously since "the PBGC was obligated to terminate the plans when the Significant Event occurred...." Id. at 98.
B. The Instant Matter
Following the D.C. Circuit's ruling, the plaintiffs commenced this action against Pichin and the PBGC. The plaintiffs' First Amended Complaint asserts three claims for relief: (1) that termination of the Pilots' A-Plan under the CSA was a transaction to evade liability and thus, Pichin and the Icahn entities are in violation of ERISA § 4069, 29 U.S.C. § 1369; (2) that Pichin, as the sole plan sponsor, contributing sponsor, and plan administrator of the TWA Pension Plans, breached its fiduciary duty to the plan participants and beneficiaries by having engaged in a prohibited transaction under ERISA; and (3) that PBGC's failure to demand or to initiate action to recover the full amount of the unfunded benefit liabilities from Pichin and the Icahn entities constitutes a breach of the PBGC's fiduciary duty as a plan trustee.
A motion to dismiss under Rule 12(b)(6) tests whether the plaintiff has properly stated a claim upon which relief can be granted. See FED. R. CIV. P. 12(b)(6). The Federal Rules only require that the complaint include "a short and plain statement of the claim showing that the pleader is entitled to relief," FED. R. CIV. P. 8(a)(2), because the complaint "must simply `give the defendant fair notice of what the plaintiff's claim is and the grounds upon which it rests.'" Swierkiewicz v. Sorema N.A., 534 U.S. 506, 512, 122 S.Ct. 992, 152 L.Ed.2d 1 (2002) (quoting Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)).
In deciding a 12(b)(6) motion to dismiss the Court will consider the facts alleged in the pleadings, documents attached as exhibits or incorporated by reference in the pleadings, and matters which the Court may take judicial notice. EEOC v. St. Francis Xavier Parochial Sch., 117 F.3d 621, 624 (D.C.Cir.1997); Chandamuri v. Georgetown University, 274 F.Supp.2d 71, 76-77 (D.D.C.2003). The Court must accept as true all well-pleaded factual allegations and grant plaintiff the benefit of all reasonable inferences that can be derived from the alleged facts. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). The suit may be dismissed for failure to state a claim only if "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Id.
The court will first address the allegation in plaintiffs' complaint that the CSA constitutes a transaction having a principal purpose of evading liability imposed by ERISA § 4062, 29 U.S.C. § 1362 and thereby in violation of ERISA § 4069, 29 U.S.C. § 1369. See Amended Compl. ¶ 81. In accordance with their claim, plaintiffs seek, inter alia, (1) a declaratory judgment that the portion of the CSA purporting to relieve Pichin and the Icahn entities from a significant portion of their liability is unlawful under ERISA and therefore void and unenforceable, and (2) an injunction requiring immediate restoration of the Pilots' A-Plan and restitution from Pichin and the Icahn entities of all benefits that were lost by plaintiffs as a result of the alleged unlawful termination of the Pilots' A-Plan in an underfunded status.5
Section 10 of the CSA provides, inter alia, that upon termination of the pension plans, "the liability under Title IV of ERISA of the Icahn sponsor, and all members of its controlled group, shall be...
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