Fisher v. Pension Benefit Guaranty Corp.

• Decision Date: 19 June 2020
• Docket Number: Civil Action No. 14-1275 (RDM)
• Citation: 468 F.Supp.3d 7
• Parties: Joseph V. FISHER, Plaintiff, v. PENSION BENEFIT GUARANTY CORPORATION, Defendant.
• Court: U.S. District Court — District of Columbia

468 F.Supp.3d 7

Joseph V. FISHER, Plaintiff,

v.PENSION BENEFIT GUARANTY CORPORATION, Defendant.

Civil Action No. 14-1275 (RDM)

United States District Court, District of Columbia.

Signed June 19, 2020

David S. Preminger, Pro Hac Vice, Keller Rohrback L.L.P., New York, NY, Lynn Lincoln Sarko, Keller Rohrback, LLP, Seattle, WA, George Michael Chuzi, Kalijarvi, Chuzi & Newman & Fitch, P.C., Washington, DC, for Plaintiff.

Mark R. Snyder, Pension Benefit Guaranty Corporation, Washington, DC, for Defendant.

AMENDED MEMORANDUM OPINION

RANDOLPH D. MOSS, United States District Judge

The Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq. , "was enacted to promote the interests of employees and their beneficiaries in employee benefit plans ... and to protect contractually defined benefits." Firestone Tire & Rubber Co. v. Bruch , 489 U.S. 101, 113, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989) (citations and quotations omitted). "Toward this end, Title IV of ERISA, 29 U.S.C. § 1301 et seq. , created a plan termination insurance program, administered by the Pension Benefit Guaranty Corporation ( [‘PBGC’ or ‘the Corporation’] ), a wholly owned [g]overnment corporation within the Department of Labor." PBGC v. R.A. Gray & Co. , 467 U.S. 717, 720, 104 S.Ct. 2709, 81 L.Ed.2d 601 (1984). The Corporation administers the program by "collect[ing] insurance premiums from covered pension plans and provid[ing] benefits to participants in those plans if their plan terminates with insufficient assets to support its guaranteed benefits." Id.

"Because plan termination can cause significant hardships for participants and substantial liabilities for [the] PBGC, ERISA outlines permissible plan termination procedures in considerable detail." In re Pension Plan for Emps. of Broadway Maint. Corp. , 707 F.2d 647, 648 (2d Cir. 1983). As relevant here, if a pension plan is unable to meet its obligations, it may be terminated under what is called "distress termination," and the "PBGC becomes trustee of the plan, taking over the plan's assets and liabilities." PBGC v. LTV Corp. , 496 U.S. 633, 637, 639, 110 S.Ct. 2668, 110 L.Ed.2d 579 (1990). ERISA imposes several requirements that a plan administrator must satisfy in order to enter distress termination, and also dictates that, after submitting a notice of intent to terminate ("NOIT"), an administrator must generally pay plan benefits only in the form of an annuity. 29 U.S.C. § 1341(c)(3)(D)(i)(I). As the Court explained in a prior opinion, "[t]his case is about the administrator's obligations in the period before it provides notice of termination." Fisher v. Pension Benefit Guar. Corp. , 151 F. Supp. 3d 159, 161 (D.D.C. 2016) (" Fisher I ") (emphasis in original).

Plaintiff Joseph Fisher is a former executive of a company that sponsored a pension plan governed by ERISA. Id. at 163. After the company declared bankruptcy, but before the plan submitted a NOIT, Fisher requested that his pension benefits be paid in a lump sum form. Id. The plan administrator denied his request on the ground that "applicable law prohibits the payment of lump sum distributions in anticipation of the termination of the Plan." Id. at 163–64. When Fisher's case eventually made it to the PBGC's Board of Appeals ("the Board" or "Appeals Board"), the Board concluded that Fisher was not entitled to a lump sum payment. See id. at 166. In Fisher I , the Court set aside that decision and remanded the case for further proceedings because the Board's decision failed to address three potentially dispositive issues: (1) the Board did not grapple with the fact that Fisher's request was denied (not merely submitted) before the NOIT and thus did "not fall within the plain terms" of the policy the Board had relied on; (2) "neither the policy nor the decision spoke to whether an administrator may deny [a lump sum] request before submitting a [NOIT];" and (3) the decision "wholly ignore[d] whether and how 29 C.F.R. § 4044.4 might apply to Fisher's claim." Id. at 168–70.

On remand, the Board concluded, inter alia , that the administrator correctly denied Fisher's request for a lump sum because 29 C.F.R. § 4044.4 prohibits the distribution of plan assets in anticipation of termination and also rejected Fisher's contention that § 4044.4(b) is inconsistent with ERISA, as amended, and thus invalid. Dkt. 49-1 at 2–4. Following that decision, Plaintiff filed an amended complaint, Dkt. 25, the PBGC answered, Dkt. 37, and the parties now cross-move for summary judgment, Dkt. 40; Dkt. 41. Fisher also moves in the alternative for the opportunity to conduct discovery pursuant to Federal Rule of Civil Procedure 56(d). Dkt. 45. For the reasons explained below, the Court will DENY Fisher's motion for summary judgment, Dkt. 40, will DENY Fisher's Rule 56(d) motion as moot, Dkt. 45, and will GRANT the PBGC's cross-motion for summary judgment, Dkt. 41.

I. BACKGROUND

The Court has recounted much of the relevant factual background and procedural history in its earlier memorandum opinion, see Fisher I , 151 F. Supp. 3d 159 at 161–65, and will only summarize and add to that background as necessary here.

A. Statutory and Regulatory Background

In 1974, animated by concerns over the growth in size and the unregulated state of the employee benefit plan sector, Congress passed the Employee Retirement Income Security Act of 1974, Pub. L. No. 93-406, 88 Stat. 829, 829 (codified at 29 U.S.C. § 1001 et seq. ). "Among the principal purposes of this ‘comprehensive and reticulated statute’ was to ensure that employees and their beneficiaries would not be deprived of anticipated retirement benefits." R.A. Gray & Co. , 467 U.S. at 720, 104 S.Ct. 2709 (quoting Nachman Corp. v. PBGC , 446 U.S. 359, 361–62, 100 S.Ct. 1723, 64 L.Ed.2d 354 (1980) ). In order to accomplish this purpose, Title IV of ERISA created a plan termination insurance program, administered by the PBGC. Id. ; see 29 U.S.C. § 1301 et seq. That program protects plan participants "by guaranteeing a class of ‘nonforfeitable benefits,’ [and by] reimbursing eligible participants or beneficiaries when a guaranteed plan terminates without sufficient funds." Davis v. PBGC , 734 F.3d 1161, 1164 (D.C. Cir. 2013) (quoting 29 U.S.C. § 1322(a) ). ERISA authorizes the PBGC to promulgate "rules[ ] and regulations "as may be necessary to carry out the purposes of [Title IV of ERISA]." 29 U.S.C. § 1302(b)(3).

"Because plan termination can cause significant hardships for participants and substantial liabilities for [the] PBGC, ERISA outlines permissible plan termination procedures in considerable detail." In re Pension Plan for Emps. of Broadway Maint. Corp. , 707 F.2d at 648. As relevant here, in 1986, Congress created a termination procedure for distressed plans as part of the Single-Employer Pension Plan Amendments Act of 1986 ("SEPPAA"), Pub. L. No. 99-272, §§ 11002, 11007, 100 Stat. 82 (codified in scattered sections 29 U.S.C. §§ 1301 – 1461 ). Under the procedure established by SEPPAA, if the PBGC finds that a plan has "insufficient assets to satisfy its pension obligations," the plan can enter "distress termination," Davis , 734 F.3d at 1164, 1166 ; 29 U.S.C. § 1341(c), which means that "the PBGC becomes trustee of the plan, taking over the plan's assets and liabilities," LTV Corp. , 496 U.S. at 637, 110 S.Ct. 2668 ; 29 U.S.C. § 1341(c)(3)(B)(iii). After a plan enters distress termination, the PBGC "uses the plan's assets to cover what it can," but "then must add its own funds to ensure payment of most of the remaining" benefits that are guaranteed by the termination insurance program. LTV Corp. , 496 U.S. at 637, 110 S.Ct. 2668. A distress termination will frequently occur after a bankruptcy filing. Dkt. 49-1 at 13 n.38 (citing 29 U.S.C. § 1341(c)(2)(B)(i), (ii) ).

SEPPAA established several requirements a plan administrator must satisfy to enter distress termination.¹ Among other things, a plan administrator must provide sixty days’ notice to all affected parties, including participants and the PBGC—an event known as a notice of intent to terminate or a "NOIT." 29 U.S.C. § 1341(a)(2), (c)(3)(D)(i)(I). Once the plan has provided the PBGC with a NOIT, the PBGC determines whether the plan has sufficient assets to pay all, some, or none of its liabilities. Id. § 1341(c)(3)(A)–(C). SEPPAA also imposes certain requirements that apply during the "interim period" commencing after the date the plan submits a NOIT and ending on the date the PBGC issues a notice concerning its determination of the plan's eligibility for distress termination. See 29 U.S.C. § 1341(c)(3)(D). Central to this case, SEPPAA requires that, during that interim period, the administrator "pay benefits attributable to employer contributions, other than death benefits, only in the form of an annuity." 29 U.S.C. § 1341(c)(3)(D)(ii)(II). In other words, no lump sum payments during the interim period.

In addition to setting out detailed termination procedures, ERISA also "requires that plan assets be distributed to participants in accordance with the six-tier allocation scheme set forth in § 4044(a)." Mead Corp. v. Tilley , 490 U.S. 714, 717, 109 S.Ct. 2156, 104 L.Ed.2d 796 (1989) (citing 29 U.S.C. § 1344(a) ). In particular, ERISA sets out "six categories, in descending order of priority, to which the Corporation must allocate a terminated plan's assets upon its termination." Lewis v. PBGC , 314 F.Supp.3d 135, 142 (D.D.C. 2018). "All benefits allocated to the first category must be met before any benefits in the second [category] are paid and so on until all assets are distributed."² Victor v. Home Sav. of Am. , 645 F. Supp. 1486, 1491 (E.D. Mo. 1986). This priority scheme is intended to ensure an equitable distribution of the plan's assets upon termination. See H.R. Rep. 93-533, as reprinted in 1974 U.S.C.C.A.N. 4639, 4660 ("An equitable priority distribution of assets would be provided upon plan termination."). "If there are insufficient...