Davis v. Pension Ben. Guar. Corp.

• Decision Date: 10 July 2009
• Docket Number: No. 08-5524.,08-5524.
• Parties: Thomas G. DAVIS, et al., Appellants v. PENSION BENEFIT GUARANTY CORPORATION, Appellee.
• Court: U.S. Court of Appeals — District of Columbia Circuit

571 F.3d 1288

Thomas G. DAVIS, et al., Appellants v. PENSION BENEFIT GUARANTY CORPORATION, Appellee.

No. 08-5524.

United States Court of Appeals, District of Columbia Circuit.

Argued May 5, 2009.

Decided July 10, 2009.

Appeal from the United States District Court for the District of Columbia (No. 1:08-cv-01064-JR).

Anthony F. Shelley argued the cause for appellants. With him on the brief for stay or injunction pending appeal and for expedited consideration and the reply was Timothy P. O'Toole.

James J. Armbruster, Assistant Chief Counsel, Pension Benefit Guaranty Corporation, argued the cause for appellee. With him on the opposition and brief to dispose of the appeal in its entirety were Judith R. Starr, General Counsel, Israel Goldowitz, Chief Counsel, Paula J. Connelly and Garth D. Wilson, Assistant Chief Counsel, and Jean Marie Breen, Attorney.

Before: HENDERSON, BROWN, and KAVANAUGH, Circuit Judges.

Opinion for the Court filed by Circuit Judge BROWN.

Concurring opinion filed by Circuit Judge KAVANAUGH, with whom Circuit Judge HENDERSON joins.

BROWN, Circuit Judge.

Approximately 1,700 U.S. Airways current and retired pilots are in the midst of a lawsuit challenging benefit determinations of the Pension Benefit Guaranty Corporation ("PBGC"). A subset of 111 plaintiffs ("the pilots") requested a preliminary injunction to prohibit the PBGC from implementing its benefit determinations while the suit is pending. After considering the four factors for a preliminary injunction, the district court denied the motion. Because the pilots show neither a substantial likelihood of success on the merits nor irreparable harm, we affirm.

I. Background

On August 11, 2002, U.S. Airways filed for Chapter 11 reorganization in the bankruptcy court for the Eastern District of Virginia. See generally In re U.S. Airways Group, Inc., 296 B.R. 734 (Bankr. E.D.Va.2003). The bankruptcy court found the reorganization plan would create "a serious funding shortfall for the [company's] defined benefit pension plan." Id. at 738. The company moved for judicial findings to permit distress termination of the pilots' retirement plan and notified the PBGC of its intent to terminate the plan. The bankruptcy court approved distress termination, and U.S. Airways agreed with the PBGC to set March 31, 2003 as the termination date of the plan.

The PBGC is a federal government corporation — created by the Employee Retirement Income Security Act of 1974 ("ERISA") — that insures private sector defined-benefit pension plans. See 29 U.S.C. § 1302. The PBGC acts as guarantor of underfunded pension plans, paying benefits to participants such as the pilots in this action. See id. § 1322. When a plan is underfunded, the PBGC's benefit payments are subject to statutory and regulatory limits. See, e.g., id. §§ 1322, 1361; 29 C.F.R. § 4044.13. ERISA permits the PBGC to serve as trustee to administer an underfunded plan in addition to its role as guarantor. 29 U.S.C. § 1342(b). The PBGC has applied to serve as trustee in every terminated plan, and courts typically grant its application. Pineiro v. PBGC, 318 F.Supp.2d 67, 72 (S.D.N.Y.2003). Following this pattern, the PBGC was appointed to serve as trustee of the U.S. Airways retirement plan.

Under its usual practice, the PBGC began making initial payments to pilots based on an estimate of what the benefits would be. See Boivin v. U.S. Airways, Inc., 297 F.Supp.2d 110, 114 (D.D.C.2003). The parties agree that it normally takes the PBGC between two and three years to make a final, formal determination of benefits for each participant. See id. Without waiting for the final determination, a group of pilots challenged the estimated benefits. This court dismissed the claim for failure to exhaust, holding the pilots must await the final determination. Boivin v. U.S. Airways, Inc., 446 F.3d 148, 158-59 (D.C.Cir.2006).

When a final benefits determination differs from the estimate, the PBGC either repays the shortfall or collects the surplus. If a participant was initially paid a lump-sum estimate and the PBGC later determined the estimate to be too high, it requests repayment of the surplus amount in a process it calls "recovery." If a participant is still receiving monthly benefit payments based on an initial estimate but the PBGC has determined that the estimate was too high, it reduces the amount of future monthly payments to recover the surplus in a process it calls "recoupment."

In February 2008, the PBGC finalized its formal benefit determinations and notified 111 out of the 1,700 plaintiffs that it would be seeking recovery or recoupment, depending on the circumstance. According to the PBGC, of the 111 pilots, 74 were sent recovery notices. Jones Decl. at 4. Those 74 pilots, on average, received lump-sum payments of over $680,000. Id. On average, the PBGC is seeking $7,049.67 in recovery, and no pilot's recovery amount is more than 1.53% of the initial lump-sum amount. Id. The other 37 pilots are still receiving monthly payments; as to them, the PBGC is seeking an average recoupment of $59.86 per month. Id. No pilot's recoupment is more than 10% of their current monthly payment. Id.

The 111 pilots sought a preliminary injunction against the PBGC's recovery and recoupment efforts. The district court denied the injunction, Davis v. PBGC, 596 F.Supp.2d 1, 5 (D.D.C.2008), and we affirm.

II. Standard of Review

The denial (or grant) of a preliminary injunction is classified as an immediately appealable interlocutory order. 28 U.S.C. § 1292(a)(1). On a motion for a preliminary injunction, the district court must balance four factors: (1) the movant's showing of a substantial likelihood of success on the merits, (2) irreparable harm to the movant, (3) substantial harm to the nonmovant, and (4) public interest. CFGC v. England, 454 F.3d 290, 297 (D.C.Cir. 2006). This Court "review[s] a district court's weighing of the four preliminary injunction factors and its ultimate decision to issue or deny such relief for abuse of discretion." Id. Legal conclusions — including whether the movant has established irreparable harm — are reviewed de novo. Id.

The four factors have typically been evaluated on a "sliding scale." Davenport v. Int'l Bhd. of Teamsters, 166 F.3d 356, 361 (D.C.Cir.1999). If the movant makes an unusually strong showing on one of the factors, then it does not necessarily have to make as strong a showing on another factor. For example, if the movant makes a very strong showing of irreparable harm and there is no substantial harm to the non-movant, then a correspondingly lower standard can be applied for likelihood of success. See, e.g., WMATC v. Holiday Tours, 559 F.2d 841, 843 (D.C.Cir.1977). Alternatively, if substantial harm to the nonmovant is very high and the showing of irreparable harm to the movant very low, the movant must demonstrate a much greater likelihood of success. It is in this sense that all four factors "must be balanced against each other." Davenport, 166 F.3d at 361. When seeking a preliminary injunction, the movant has the burden to show that all four factors, taken together, weigh in favor of the injunction. CFGC, 454 F.3d at 297.

The pilots, misreading our precedent, insist they need "only establish that serious legal questions are at issue" in order to succeed on appeal. Appellants' Br. at 6. They reach that conclusion by focusing on language in Holiday Tours, where this court noted a movant need not necessarily show a 51% likelihood of success on the first prong of the preliminary injunction analysis. 559 F.2d at 843. But Holiday Tours did not eliminate the other factors. The court simply acknowledged that a lessor likelihood of success might suffice if each of the other three factors "clearly favors" granting the injunction. Id. The pilots argue that, because the other three factors are "not contrary to" a preliminary injunction, they need only raise serious legal questions. Appellants' Br. at 7. They are wrong.

The Supreme Court has recently addressed the standard for a preliminary injunction. See Winter v. NRDC, ___ U.S. ___, 129 S.Ct. 365, 375, 172 L.Ed.2d 249 (2009) (holding that irreparable injury must be likely, "not just a possibility"). We note that the analysis in Winter could be read to create a more demanding burden, although the decision does not squarely discuss whether the four factors are to be balanced on a sliding scale. See id. at 392 (Ginsburg, J., dissenting) ("[C]ourts have evaluated claims for equitable relief on a `sliding scale,' sometimes awarding relief based on a lower likelihood of harm when the likelihood of success is very high. This Court has never rejected that formulation, and I do not believe it does so today."). We need not decide whether a stricter standard applies, because the pilots fail even under the "sliding scale" analysis of Davenport.

III. Discussion

Of the eleven substantive claims in the lawsuit, only three are proffered in support of a preliminary injunction. First, the pilots argue the PBGC incorrectly interprets an ERISA provision prioritizing benefits. The relevant language from ERISA limits Priority Category 3 — the prioritization level relevant here — to benefits "based on the provisions of the plan (as in effect during the 5-year period ending on [the plan's termination] date) under which such benefit would be the least." 29 U.S.C. § 1344(a)(3)(A). The PBGC has determined the plan has sufficient assets to cover all benefits in Priority Category 3, but the pilots believe the PBGC has improperly excluded the U.S. Airways Early Retirement Incentive Program from Priority Category 3.

The program authorizes incentives for early retirement. The question is whether the program was "in effect during the 5-year period ending on [the plan's termination] date." Id. (emphasis added). The phrase is not defined in § 1344(a)(3)(A). The parties do not dispute the relevant dates: The program was adopted by U.S. Airways on ...