Boivin v. Us Airways, Inc.

Decision Date19 December 2003
Docket NumberNo. CIV.A. 03-2373(JR).,CIV.A. 03-2373(JR).
Citation297 F.Supp.2d 110
PartiesCharles BOIVIN, et al., Plaintiffs, v. US AIRWAYS, INC., et al., Defendants.
CourtU.S. District Court — District of Columbia

Joseph Richard House, Pension Benefit Guaranty Corporation, Raymond Charles Fay, Bell, Boyd & Lloyd, PLLC, Washington, DC, Janet Louise Dhillon, Skadden, Arps Slate, Meagher & Flom LLP, Washington, DC, for defendants.

Sherwin S. Kaplan, Thelen, Reid & Priest, LLP, Washington, DC, for plaintiffs.

MEMORANDUM ORDER

ROBERTSON, District Judge.

The plaintiffs in this case are retired U.S. Airways pilots and, with the exception of plaintiffs Michael Oakey and Thomas Davis,1 are participants in U.S. Airways' Pilots' Retirement Income Plan (the "Plan"). They seek to compel the Pension Benefit Guaranty Corporation ("PBGC") to

enjoin[ PBGC] from paying less than legally required amounts to participants [in the Plan] and compel[] it to immediately commence monthly payments at a level which is the greater of the statutory guaranteed maximum or 90% of the pre-termination benefit except in the case of retirees who received a pre-termination benefit less than the statutory guaranteed maximum[, to whom] PBGC should immediately commence payment of the full pre-termination monthly benefit[;] compel PBGC to make initial benefit determinations within two years of the termination of the plan, March 31, 2005[;] order U.S. Airways and PBGC to immediately provide them with the calculations, guidelines, procedures and interpretations applied in determining plaintiffs' current benefit payments[; and] order U.S. Airways to fully cooperate with PBGC in its efforts to make initial benefit determinations.

Plaintiffs' Application for a Temporary Restraining Order, at 1-2, incorporated by reference in Plaintiffs' Motion for Preliminary Injunction, at 1. For the reasons stated below, plaintiffs' motion for preliminary injunction [# 3] is denied.

Background

On August 11, 2002, U.S. Airways Group, Inc., and seven subsidiaries ("US Airways"), filed voluntary petitions for Chapter 11 reorganization in the Bankruptcy Court of the Eastern District of Virginia. US Airways "aggressively pursued a `fast track' reorganization, with the announced goal of being out of chapter 11 by the end of the first-quarter, 2003." In re U.S. Airways Group, Inc., 296 B.R. 734, 739-40 (Bankr.E.D.Va.2003) ("Bankr.Court Decision"). It soon became apparent that U.S. Airways' seven-year reorganization plan would create "a serious funding shortfall for [US Airways'] defined benefit pension plan." Id. at 740-41. On January 30, 2003, U.S. Airways notified PBGC of its intent to "distress" terminate its under-funded "defined benefits" plan—the Pilots' Retirement Income Plan. That same day, U.S. Airways moved in Bankruptcy Court for judicial findings, as required by ERISA § 4041(c)(2)(B)(ii)(IV)2, to permit a distress termination of the Plan.

On March 2, 2003, the Bankruptcy Court found that U.S. Airways had satisfied the requirements for a distress termination: "Unless the Plan is terminated, the debtors will be unable to pay all of their debts pursuant to a plan of reorganization and will be unable to continue in business outside the chapter 11 reorganization process." In re U.S. Airways Group, Inc., No. 02-83984 (Bankr.E.D.V.A. Mar. 2, 2003), at 1. Because the Plan had been established pursuant to a collective bargaining agreement between U.S. Airways and the Airline Pilots Association ("ALPA"), however, the Bankruptcy Court's order terminating the Plan was conditioned upon the union's consent. US Airways and ALPA subsequently reached agreement, and, on March 28, 2003, U.S. Airways entered into an agreement with PBGC establishing March 31, 2003 as the date of the Plan's termination.

When a "defined benefits" plan is to be terminated as the U.S. Airways Plan was terminated here, by "distress termination," 29 U.S.C. § 1341(c), PBGC and the pre-termination plan administrator, in this case U.S. Airways, have certain responsibilities to plan participants and beneficiaries. See, e.g., id.

It was U.S. Airways' pre-termination responsibility to revise benefit payments under the Plan from then-current levels to what it estimated would be the amount of benefits that would covered by plan assets or guaranteed by PBGC following termination. See 29 U.S.C. § 1341(c)(3)(D)(ii)(IV); 29 C.F.R. § 4041.42(c). Revised benefit calculations are governed by ERISA and PBGC regulations, and depend in part on estimates of the assets of the Plan and the order in which they will be allocated to participants. See 29 U.S.C. §§ 1344(a)(1)-(6). US Airways' pre-termination calculations were— and were intended to be—estimates, see 29 C.F.R. §§ 4022.61-63. The parties agree that PBGC has the duty of making the formal determination of each Plan participant's post-termination benefits. See 29 C.F.R. §§ 4003.1 et seq.

Plan participants were informed by U.S. Airways of the pending termination and of their estimated post-termination benefits by letters dated March 28, 2003:

Pursuant to PBGC requirements, your benefit under the Pension Plan will be reduced to the maximum amount payable by the PBGC. In general, for pilots who retired or pilots who could have retired before April 1, 2000, the pension benefit adjustment is estimated to be 85% of the April 1, 2000 benefit (based on plan provisions in effect on April 1, 1998). However, if the adjusted pension benefit is below the prescribed PBGC maximum benefit (adjusted for age and optional form of payment), the amount payable is increased to the lesser of the PBGC maximum or the current March 1, 2003 benefit. For pilots who were not eligible to retire before April 1, 2000, the retirement benefit is the lesser of the PBGC maximum (adjusted for age and optional form of payment) or the current March 1, 2003 benefit amount. If a partial lump sum payment was taken at retirement, the calculations described above are first done as if no partial lump sum was paid at retirement. The remaining benefit is reduced by the annuity value of the lump sum previously received.

Letter from U.S. Airways, dated March 28, 2003, Compl., Ex. C.

PBGC, a United States government corporation, see 29 U.S.C. § 1302, has the primary responsibility of guaranteeing benefits, up to statutory limits, of private-sector defined benefit pension plans.3 See PBGC v. LTV Corp., 496 U.S. 633, 637, 110 S.Ct. 2668, 110 L.Ed.2d 579 (1990). The Supreme Court has described the PBGC's limited role as guarantor of plan benefits in these terms:

When a plan covered under Title IV terminates with insufficient assets to satisfy its pension obligations to the employees, ... [t]he PBGC ... must add its own funds to ensure payment of most of the remaining "nonforfeitable" benefits, i.e., those benefits to which participants have earned entitlement under the plan terms as of the date of termination. ERISA does place limits on the benefits PBGC may guarantee upon plan termination, however, even if an employee is entitled to greater benefits under the terms of the plan.

LTV Corp., 496 U.S. at 637-38, 110 S.Ct. 2668 (internal citations omitted).

Another responsibility of PBGC is to review the financial condition of a plan to determine whether its assets are sufficient, when allocated according to the priorities set out in the statute, 29 U.S.C. § 1344, to discharge its duty to pay guaranteeable benefits. See Piech v. PBGC, 744 F.2d 156, 158 (D.C.Cir.1984). If PBGC cannot make this determination, it "must request the appointment of itself or a third party to act as trustee." Id. (citing 29 U.S.C. § 1342(b)). Although PBGC is not required to apply to be appointed the trustee of terminated plans, 29 U.S.C. § 1342(b), it usually does apply, and the appropriate United States district or bankruptcy court "invariably" grants its application. See In re Interstate Cigar Co., 150 B.R. 305, 307 (Bankr.E.D.N.Y.1993). This Plan was no exception, and PBGC, at its own request, was appointed trustee of the Plan.

When the U.S. Airways' Plan was terminated on March 31, 2003, PBGC immediately began paying the estimated benefits that U.S. Airways had calculated and announced pre-termination. PBGC has not yet made its formal determination of each participant's post-termination benefits. It is undisputed that the usual time for PBGC to issue these formal benefit determinations to all participants is two to three years after PBGC takes over a plan.

The primary complaint of these plaintiffs is that the estimated benefit calculations are incorrectly low as to them, and that waiting two to three years for a formal benefit determination would cause them great hardship. In describing the miscalculations, plaintiffs divide themselves into four categories according to the type of calculation error alleged:

1. elderly participants (approximately 230 participants who are in their seventies and eighties) who had their benefits reduced by 15 percent, but who, because of their age, were guaranteed benefits above the amounts they were receiving pre-termination and who, accordingly, should not have had their benefits reduced at all, see Tr. of Proceedings before Judge James Robertson, Dec. 5, 2003, at 9-13;

2. participants who elected to take lump-sum payments upon retirement and who assert that the lump-sum amount was improperly considered as part of the annuity they were receiving as of the date of termination of the plan in calculating their benefits, instead of considering only their actual annuity, see id., at 13-15;

3. participants who fit within priority category three, see 29 U.S.C. § 1344(a)(3), and who assert that their estimated benefits are based upon a mis-calculation that the Plan was only 85 percent fully funded, when it appears that the Plan is fully funded at a much higher percentage, see id., at 15-16; and

4. participants who had their benefits calculated based on their actual ages at the time of...

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