Duncan v. Muzyn

Decision Date16 March 2018
Docket NumberNo. 17-5389,17-5389
Citation885 F.3d 422
Parties Jerry DUNCAN, et al., Plaintiffs, Charles T. Evans; David McBride; Ronald E. Farley; Larry J. Simpson; Robert B. Bonds; Steve Hinch, Plaintiffs–Appellants, v. Leonard J. MUZYN, et al., Defendants, Tennessee Valley Authority Retirement System ; Tennessee Valley Authority, Defendants–Appellees.
CourtU.S. Court of Appeals — Sixth Circuit

ARGUED: Michael J. Wall, BRANSTETTER, STRANCH & JENNINGS, PLLC, Nashville, Tennessee, for Appellants. Edmund S. Sauer, BRADLEY ARANT BOULT CUMMINGS LLP, Nashville, Tennessee, for Appellee Tennessee Valley Authority Retirement System. Edward C. Meade, TENNESSEE VALLEY AUTHORITY, Knoxville, Tennessee, for Appellee Tennessee Valley Authority. ON BRIEF: Michael J. Wall, James G. Stranch, III, R. Jan Jennings, Michael G. Stewart, BRANSTETTER, STRANCH & JENNINGS, PLLC, Nashville, Tennessee, for Appellants. Edmund S. Sauer, BRADLEY ARANT BOULT CUMMINGS LLP, Nashville, Tennessee, James S. Christie, Jr., BRADLEY ARANT BOULT CUMMINGS LLP, Birmingham, Alabama, for Appellee Tennessee Valley Authority Retirement System. Edward C. Meade, James S. Chase, Frances Regina Koho, TENNESSEE VALLEY AUTHORITY, Knoxville, Tennessee, for Appellee Tennessee Valley Authority.

Before: MOORE, THAPAR, and LARSEN, Circuit Judges.

THAPAR, J., delivered the opinion of the court in which LARSEN, J., joined. MOORE, J. (pp. 429–36), delivered a separate dissenting opinion.

Underfunded public pensions are a vexing public-policy issue. See generally Jack M. Beermann, The Public Pension Crisis , 70 Wash. & Lee L. Rev. 3 (2013). One answer is to cut benefits, see id. at 31, 86, but unsurprisingly, that often proves controversial. So it was here. Jerry Duncan and a class of pension-plan participants sued their employer and its pension system when the system cut their benefits. Their suit has already produced one appeal before this court. Duncan v. Muzyn , 833 F.3d 567 (6th Cir. 2016). They now pursue the second.

I.

The Tennessee Valley Authority (TVA) provides funding for the Tennessee Valley Authority Retirement System ("the Plan"). A seven-member board ("the Board") administers the Plan and manages its assets. And the Plan, in turn, provides defined benefits to participants. That means the Plan, by way of the TVA's contributions, pays a pension benefit to participants in a defined amount. See West v. AK Steel Corp. , 484 F.3d 395, 399 (6th Cir. 2007) ("Under a defined benefit plan, an employee's benefit is an amount, either in the form of an annuity or a lump-sum payment, equal to a specified percentage of the employee's salary in the final years of his or her employment."). As is key here, the benefit includes a cost-of-living adjustment.

In 2009, the Plan found itself in financial trouble. Thanks in no small part to the recession, the Plan's liabilities exceeded its assets and it needed to make some changes to ensure its long-term stability. So the Board cut some benefits. These cuts included temporarily lowering cost-of-living adjustments while also increasing the age at which certain Plan participants would first become eligible to receive cost-of-living adjustments. This litigation followed.

There are two issues in this appeal. First, Plaintiffs maintain that the Board failed to give proper notice to the TVA and Plan members before it made the cuts. Second, Plaintiffs contend that the Board violated the Plan's rules by paying their cost-of-living adjustments for certain years out of the wrong account. The district court granted summary judgment for the TVA and the Board on both claims. We review de novo. Richmond v. Huq , 879 F.3d 178, 186 (6th Cir. 2018).

II.

Plaintiffs first argue that the Board's cuts to cost-of-living adjustments failed to comply with the Plan's notice rules. Section 13 of the rules lays out what notice is required. Under Section 13, the Board must give at least thirty days' notice of a proposed amendment to the TVA and Plan members. Then, the TVA "may, by notice in writing addressed to the [B]oard within said 30 days, veto any such proposed amendment, in which event it shall not become effective." R. 126-6, Pg. ID 1601. The parties disagree about whether the Board must provide notice to the TVA and Plan members before voting to approve an amendment, as Plaintiffs contend, or after, as occurred here.

The TVA and the Plan argue that their interpretation is entitled to Auer deference. See Auer v. Robbins , 519 U.S. 452, 461, 117 S.Ct. 905, 137 L.Ed.2d 79 (1997) (deferring to an agency's interpretation of its own regulation). Plaintiffs, by contrast, ask us to apply another rule, contra proferentem , which directs courts to construe ambiguous contract language against the drafter. In other words, the parties invite us both to defer to the drafter pursuant to Auer and to construe against the drafter pursuant to contra proferentem . We cannot do both, and we know of no test that would help us sort out which rule, if either, should win in a case like this.1 Fortunately, we need not resolve this issue, because Section 13 is not ambiguous.

After all, simply calling something ambiguous does not make it so. Indeed, determining the point at which "ambiguousness constitutes an ambiguity" is no easy task. United States v. Hansen , 772 F.2d 940, 948 (D.C. Cir. 1985) (Scalia, J.). Contract language is not ambiguous merely because the parties interpret it differently. Roy v. Bledsoe Cmty. Hosp., Inc. , 61 Fed.Appx. 930, 934 (6th Cir. 2003). Rather, our court has previously stated that a contract must be "subject to two reasonable interpretations" to be ambiguous. Schachner v. Blue Cross & Blue Shield of Ohio , 77 F.3d 889, 893 (6th Cir. 1996) (citation omitted). This, of course, begs the question: When are two interpretations reasonable? Obviously, when a contract's language supports both interpretations equally, both are reasonable and the contract is ambiguous. Alternatively, a contract's language might permit of no reasonable interpretation, in which case it would be ambiguous as well. Framing the inquiry in terms of "reasonable interpretations," then, does not get us far. Rather, where, as here, one interpretation far better accounts for the language at issue, the language is not ambiguous.

Here, Section 13's meaning is plain. Recall Section 13's notice requirement: The Board must give at least thirty days' notice of a proposed amendment to the TVA and Plan members, after which the TVA may "veto any such proposed amendment" within the thirty-day period, "in which event it shall not become effective." R. 126-6, Pg. ID 1601. The best reading of Section 13 is that it requires notice only after the Board has voted to approve an amendment.

To understand why, focus on two words in Section 13: "veto" and "effective." First, consider "veto." The TVA may "veto any such proposed amendment" during the thirty-day notice period. The Plan's rules do not define veto. But the term typically connotes a power to nullify a formal action by another body. E.g. , Veto , Black's Law Dictionary (10th ed. 2014) (defining veto as "[a] power of one governmental branch to prohibit an action by another branch; esp., a chief executive's refusal to sign into law a bill passed by the legislature"). The average American no doubt associates "veto" with the President's ability to reject legislation that Congress has voted to enact. See U.S. Const. art. I, § 7, cl. 2 ; Schoolhouse Rock!, I'm Just a Bill , YouTube (Sept. 1, 2008), http://www.youtube.com/watch?v=tyeJ55o3El0, at 2:28–2:35 ("You mean even if the whole Congress says you should be a law, the President can still say no? ... Yes, that's called a veto.").

Next, consider "veto" along with "effective." If the TVA vetoes a proposed amendment, "it shall not become effective." The natural inference from this language is that if the TVA does not veto a proposed amendment, it shall become effective—"in operation at a given time." Effective , Black's Law Dictionary (10th ed. 2014); cf. U.S. Const. art. I, § 7, cl. 2 ("If any Bill shall not be returned by the President ... after it shall have been presented to him, the Same shall be a Law, in like Manner as if he had signed it ...."). Otherwise, the inclusion of the phrase "it shall not become effective" would be surplusage, because the word "veto" alone indicates that the TVA's decision to reject the proposed amendment would render the proposed amendment ineffective. Taken together, "veto" and "effective" indicate that the Board's Section 13 notice informs the TVA that the Board has voted to adopt an amendment and, if the TVA does not veto it within thirty days, the amendment will become effective. Cf. Duncan , 833 F.3d at 571 (discussing Section 13 and observing that "amendments proposed by the board become effective only if the TVA does not exercise its veto within thirty days").

Plaintiffs offer an alternative interpretation. They suggest that a veto could occur before the Board takes a final vote, thereby "kill[ing]" a nascent amendment and rendering it ineffective. But using "veto" and "effective" in this counterintuitive manner would read a procedure into Section 13 that does not jive with its text. Under Plaintiffs' interpretation, the Board would vote twice—once to provide notice that it was considering an amendment and again to reaffirm the amendment after the veto period has passed. And in between votes, the amendment would not become effective (even though Section 13 indicates it should) because the Board has not yet voted to reaffirm itself. The Board presumably could then change its mind and elect not to reaffirm, thereby invalidating an otherwise effective amendment. This would essentially give the Board a super -veto (when Section 13's plain language gives the TVA the final say) and render the whole process a confusing waste of time. These unusual consequences illustrate that Plaintiffs cannot reasonably account for Section 13's use of "veto" and...

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