Lewis v. Pension Benefit Guaranty Corp.

• Decision Date: 21 August 2018
• Docket Number: No. 17-5068,17-5068
• Citation: 912 F.3d 605
• Parties: K. Wendell LEWIS, et al., Appellees v. PENSION BENEFIT GUARANTY CORPORATION, Appellant
• Court: U.S. Court of Appeals — District of Columbia Circuit

912 F.3d 605

K. Wendell LEWIS, et al., Appellees

v.PENSION BENEFIT GUARANTY CORPORATION, Appellant

No. 17-5068

United States Court of Appeals, District of Columbia Circuit.

Argued November 16, 2017

Decided August 21, 2018

Reissued December 21, 2018

Charles L. Finke, Deputy Chief Counsel, pro hac vice, argued the cause for appellant. With him on the briefs were Judith R. Starr, General Counsel, Kenneth J. Cooper, Assistant General Counsel, Paula J. Connelly, Assistant Chief Counsel, and Mark R. Snyder, Attorney.

Anthony F. Shelley argued the cause for appellees. With him on the brief were Timothy P. O'Toole and Michael N. Khalil.

Before: Griffith and Pillard, Circuit Judges, and Williams, Senior Circuit Judge.

Circuit Judge Griffith :

In this interlocutory appeal, we reverse the district court's decision allowing participants in a pension plan to seek recovery of an increase in the value of plan assets that took place after the plan had been terminated.

I

A

In 2005, Delta Airlines, Inc. ("Delta") filed for bankruptcy and stopped contributing to the pension plan it sponsored for its pilots. That plan was called the Delta Pilots Retirement Plan (the "Delta Plan"). The following year, Delta and the Pension Benefit Guaranty Corporation (the "Corporation") agreed to terminate the Delta Plan because it had insufficient assets to support the benefit payments it promised to the pilots.

Title IV of the Employee Retirement Income Security Act (ERISA), 29 U.S.C. §§ 1301 - 1461, created the Corporation "to ensure that employees and their beneficiaries would not be completely deprived of anticipated retirement benefits by the termination of pension plans before sufficient funds have been accumulated in the plans." PBGC v. LTV Corp. , 496 U.S. 633, 637, 110 S.Ct. 2668, 110 L.Ed.2d 579 (1990) (internal quotation marks omitted). To that end, the Corporation collects premiums from plan sponsors like Delta and guarantees certain benefits to plan participants even if a plan terminates without enough money to pay its ongoing obligations. See 29 U.S.C. §§ 1306 - 1307, 1322, 1361 ; LTV Corp. , 496 U.S. at 636-38, 110 S.Ct. 2668 ; Davis v. PBGC ("Davis II "), 734 F.3d 1161, 1164-65 (D.C. Cir. 2013). Importantly, guaranteed benefits are subject to limitations outlined in Title IV. See 29 U.S.C. §§ 1322(b), 1361 ; LTV Corp., 496 U.S. at 638, 110 S.Ct. 2668.

When a plan terminates without enough funding to provide even the guaranteed benefits established by Title IV, a statutory trustee collects the plan's remaining assets and begins making promised payments according to a list of statutory priorities. See 29 U.S.C. §§ 1341(c)(iii)(B)(3), 1342(b) - (d), 1344 ; 29 C.F.R. pt. 4044. The Corporation then provides additional money from its own funds to make up the difference between those payments and the guaranteed benefits. See 29 U.S.C. § 1322 ; 29 C.F.R. pt. 4022; LTV Corp. , 496 U.S. at 637-38, 110 S.Ct. 2668 ; Davis II , 734 F.3d at 1164-65. Although not required, the Corporation is almost always appointed as the statutory trustee who administers terminated plans, assuming this responsibility in addition to its role as guarantor. See Boivin v. U.S. Airways, Inc. , 446 F.3d 148, 150 (D.C. Cir. 2006). When Delta and the Corporation agreed to terminate the Delta Plan, they agreed the Corporation would become the statutory trustee.

The Corporation determined the Delta Plan had a deficit of over $2.5 billion in unfunded benefits when it terminated, almost $800 million of which were guaranteed under Title IV. Actuarial Case Memo for Delta Pilots Retirement Plan (Mar. 24, 2010), J.A. 201-03. Based on this information, the Corporation began paying estimated post-termination benefits to the pilots. It took six years, however, to finish making final benefit determinations. Administrative appeals filed by the pilots to challenge their benefit determinations concluded the following year, in 2013. See 29 C.F.R. pt. 4003 (explaining the process for determining post-termination benefits); Davis v. PBGC ("Davis I "), 571 F.3d 1288, 1291 (D.C. Cir. 2009) (same); Boivin , 446 F.3d at 151 (same). If the Corporation found that participants were entitled to larger benefit payments than they were receiving under their initial estimates, the Corporation reimbursed those pilots with interest for any difference and adjusted their benefits going forward. See 29 C.F.R. § 4022.81 - .83 ; Davis I , 571 F.3d at 1291.

B

Nearly 1,700 pilots in the Delta Plan or their beneficiaries sued the Corporation to further challenge their benefit determinations, assert violations of the Administrative Procedure Act, 5 U.S.C. § 706, and request various forms of injunctive and declaratory relief. The pilots also allege that the Corporation breached its fiduciary duty as statutory trustee in various ways, such as creating procedural obstacles for and withholding necessary information from participants who were trying to appeal their benefit determinations, improperly denying those appeals for untimeliness, hiring incompetent contractors to estimate the value of plan assets and leaving them unsupervised, and misallocating pension funds to younger participants who would not retire and collect the money for many years. Am. Compl. ¶¶ 66-72, J.A. 300-03. All of this, the pilots claim, allowed the Corporation to control Delta Plan assets for a longer period and collect "massive investment returns" rather than timely paying the pilots what they were owed. Id. ¶ 72, J.A. 303. The pilots argue that 29 U.S.C. § 1303(f)(1) authorizes "appropriate equitable relief" and so the Corporation "should be required to disgorge itself of this unjust enrichment." Am. Compl. ¶ 72, J.A. 303. And they ask to recover this money individually instead of on behalf of the Delta Plan.

The Corporation moved to dismiss the breach of fiduciary duty claim on numerous grounds, including that 29 U.S.C. § 1344(c) prevents disgorgement in this case. Section 1344(c) provides that "[a]ny increase or decrease in the value of the assets of a single-employer plan occurring after the date on which the plan is terminated shall be credited to, or suffered by, the [C]orporation." Disgorgement, the Corporation explained, would impermissibly redirect to the pilots the post-termination increase in the value of plan assets.

The district court denied the Corporation's motion to dismiss and its subsequent motion for reconsideration. Lewis v. PBGC , 197 F.Supp.3d 16 (D.D.C. 2016), reconsideration denied , No. 15-cv-1328, 2017 WL 7047932 (D.D.C. Jan. 23, 2017). The district court explained that the pilots were trying only to "recoup the alleged ill-gotten investment returns on [Delta] Plan benefits that the plaintiffs claim should have been distributed to them, not ... divert from the Corporation any gains (or losses) from assets properly held in the [Delta] Plan." Lewis , 197 F.Supp.3d at 26 (citation omitted); accord Lewis , 2017 WL 7047932, at *3. Such a claim, it said, might not be prohibited by § 1344(c). Lewis , 2017 WL 7047932, at *3.

However, the district court concluded that "the dearth of controlling precedent that supports the Court's determination regarding the fiduciary breach claim, coupled with the Corporation's credible contention that ... ERISA does not permit the plaintiffs to pursue this claim, raise[s] a controlling question of law as to which a substantial ground for difference of opinion exists." Id. The district court then certified for interlocutory appeal its order denying the motion to dismiss, and identified four "controlling questions of law" for us to consider: First, can individuals bring a fiduciary breach claim against the Corporation under § 1303(f) in addition to requesting judicial review of the Corporation's post-termination benefit determinations? Second, can plan participants in such a lawsuit recover more than their statutorily defined benefits under Title IV of ERISA? Third, can plan participants in such a lawsuit recover individual, as opposed to plan-wide, relief for the alleged fiduciary breach? And fourth, does § 1344(c) preclude the remedy of disgorgement of post-termination investment gains derived as a result of the alleged fiduciary breach? Order Certifying Interlocutory Appeal, J.A. 384-85; see 28 U.S.C. § 1292(b). We granted the petition for leave to file an interlocutory appeal. J.A. 653. Since that time, the district court has resolved in favor of the Corporation all other claims in this lawsuit. Lewis v. PBGC , 314 F.Supp.3d 135 (D.D.C. 2018).

The district court has jurisdiction over this case pursuant to § 1303(f), and we have jurisdiction under 28 U.S.C. § 1292(b) to decide this interlocutory appeal. We review de novo the district court's decision on the motion to dismiss. Jones v. Kirchner , 835 F.3d 74, 79 (D.C. Cir. 2016). Because we conclude that § 1344(c) prevents the pilots from recovering any post-termination increase in the value of Delta Plan assets, disgorgement is not an available remedy in this case and we do not address the other questions.

II

A

We begin by examining the text of § 1344(c), which provides in full:

Any increase or decrease in the value of the assets of a single-employer plan occurring during the period beginning on the later of (1) the date a trustee is appointed under section 1342(b) of this title or (2) the date on which the plan is terminated is to be allocated between the plan and the [C]orporation in the manner determined by the court (in the case of a court-appointed trustee) or as agreed upon by the [C]orporation and the plan administrator in any other case. Any increase or decrease in the value of the assets of a single-employer plan occurring after the date on which the plan is terminated shall be credited to, or suffered by, the [C]orporation.

29 U.S.C. § 1344(c) (emphasis added).

The two halves of this subsection are in tension. The first half of § 1344(c) explains that any change in the value of plan assets occurring after "a trustee is appointed under § 1342...