Pension Ben. Guar. v. Wilson N. Jones Mem. Hosp., No. 03-40961.

CourtUnited States Courts of Appeals. United States Court of Appeals (5th Circuit)
Writing for the CourtEmilio M. Garza
PartiesPENSION BENEFIT GUARANTY CORP., Plaintiff-Appellee, v. WILSON N. JONES MEMORIAL HOSPITAL, Defendant-Appellant.
Docket NumberNo. 03-40961.
Decision Date01 July 2004

Page 362

374 F.3d 362
PENSION BENEFIT GUARANTY CORP., Plaintiff-Appellee,
v.
WILSON N. JONES MEMORIAL HOSPITAL, Defendant-Appellant.
No. 03-40961.
United States Court of Appeals, Fifth Circuit.
July 1, 2004.

Page 363

Garth David Wilson (argued), Pension Ben. Guar. Corp., Washington, DC, for Plaintiff-Appellee.

Page 364

David R. Levin (argued), Wiley, Rein & Fielding, Washington, DC, Lindsey Scott Birdsong, Potter Minton, Tyler, TX, for Defendant-Appellant.

Appeal from the United States District Court for the Eastern District of Texas.

Before KING, Chief Judge, and REAVLEY and EMILIO M. GARZA, Circuit Judges.

EMILIO M. GARZA, Circuit Judge:


The district court in this case granted the Pension Benefit Guaranty Corporation's ("PBGC's") motion for summary judgment holding that the Wilson N. Jones Memorial Hospital ("Wilson Jones") did not use the correct interest rate to calculate the lump sum distribution payments it made in connection with the termination of its retirement plan. The district court found that Wilson Jones must comply with a PBGC order compelling it to use a lower interest rate to calculate those payments. We find that the district court properly required Wilson Jones to comply with the PBGC order.

I

The PBGC is a wholly-owned government corporation responsible for the administration and enforcement of Title IV of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1301-1461. See Pension Benefit Guar. Corp. v. LTV Corp., 496 U.S. 633, 636-37, 110 S.Ct. 2668, 110 L.Ed.2d 579 (1990) (describing the organization and functions of the PBGC). Title IV is intended "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.'" Id. at 637, 110 S.Ct. 2668 (quoting Pension Benefit Guar. Corp. v. R.A. Gray & Co., 467 U.S. 717, 720, 104 S.Ct. 2709, 81 L.Ed.2d 601 (1984)). It sets forth a complex statutory framework that controls the termination of all pension plans. Within this framework, an employer is permitted to voluntarily terminate its pension plan in a "standard termination" if, inter alia, the plan's assets are sufficient to provide for its benefit liabilities. 29 U.S.C. § 1341(b)(1)(D) (1994). Compliance with the requirements of Title IV is the exclusive means by which an employer may voluntarily terminate a pension plan. 29 U.S.C. § 1341(a)(1).

Wilson Jones began the standard termination process for its Retirement Plan for Employees ("the Plan") during 1995, with a termination date of December 31, 1995. During the termination process, three amendments were made to the Plan. In June, 1995, the Plan was amended to permit participants to elect to receive their distributions upon plan termination as a lump sum payment instead of as an annuity. At that time, the Plan was also amended to define the interest rate assumption used for valuing benefit payments as "the annual rate of interest on 30-year Treasury securities for the second calendar month immediately preceding the first day of the Plan Year during which the Annuity Starting Date occurs." A final amendment, in January 1996, specified that the "Annuity Starting Date" for the "lump sum payments offered in connection with the termination of the plan" would be the Plan termination date of December 31, 1995. The combined effect of these amendments established that the November 1994 annual interest rate for 30-year Treasury securities (8.08%) ("the November 1994 rate") would be used to value the lump sum distributions in the Plan's termination.

1

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After submitting all three Plan amendments to the Internal Revenue Service ("IRS") for approval,2 Wilson Jones made the required standard termination filing with the PBGC. As part of this filing, Wilson Jones requested that the PBGC permit it to delay the final distribution of Plan benefits pending IRS approval of the Plan amendments. After receiving a favorable IRS determination letter, the Plan commenced with its final distribution of benefits in November 1996. In compliance with the Plan's terms, as amended, Wilson Jones used the November 1994 rate to calculate the amount of the lump sum termination distributions.

Included within the PBGC's Title IV responsibilities is a requirement to audit "a statistically significant sample" of standard terminations each year to determine that the plan beneficiaries in those terminations received all of the benefits to which they were entitled. 29 U.S.C. § 1303(a) (1994). The PBGC audited the Plan's standard termination during 1998. The PBGC auditor found that the Plan's use of the November 1994 rate to value its lump sum distributions was improper. Instead, the audit determined that because "distributions occurred in November 1996 ... the applicable interest rate would be the rate in effect on November 1, 1995 (6.26%)" ("the November 1995 rate"). The PBGC concluded that the failure to use the November 1995 rate meant that Wilson Jones did not fully provide for all benefit liabilities under the Plan, as required by the standard termination statute. Wilson Jones was ordered to calculate, and distribute, the additional benefit payment amounts that would result from using the lower November 1995 rate.3

Wilson Jones requested the PBGC to reconsider this initial determination pursuant to the PBGC's administrative procedures. Wilson Jones raised a number of specific challenges to the auditor's interest rate decision as part of this process. After reviewing the audit findings the PBGC issued a final determination upholding the auditor's order without expanding upon the order's legal analysis. Wilson Jones did not comply with this order and the PBGC filed suit in the district court seeking to enforce it.

In the district court both parties agreed that there were no material issues of fact in this case, and they both moved for summary judgment regarding the proper

Page 366

interest rate. Wilson Jones argued that it complied with the Plan's amended terms when using the November 1994 rate to calculate the Plan distributions and, consequently, that it properly provided for all of the Plan's benefit liabilities. The PBGC did not dispute that Wilson Jones complied with the Plan's terms as written. Instead it argued that, as a matter of law pursuant to 26 U.S.C. § 417 (1994) and its associated regulations, the annuity starting date for the Plan's lump sum termination distributions is the distribution date, November 1996, rather than the termination date, December 31, 1995, as specified in the Plan amendments. An annuity starting date of November 1996 requires the Plan to use the November 1995 rate as the applicable interest rate.

The district court held that the PBGC had authority to interpret 26 U.S.C. § 417 and that the PBGC's views on the issues in this case were entitled to deference. The district court found that the PBGC's understanding of annuity starting date was a reasonable construction of the statute and regulations at issue and that the PBGC's interest rate decision was reasonable. The district court granted the PBGC's summary judgment motion, denied Wilson Jones's motion, and ordered Wilson Jones to recalculate the value of the lump sum distributions using the November 1995 rate and to pay the additional benefits to the participants with interest from the date of the original distribution to the date of the additional payment. Wilson Jones appeals. For the reasons described below, we hold that the district court properly granted the PBGC's motion for summary judgment.

II

We review the grant of summary judgment de novo, applying the same standards as the district court. Houston Police Officers' Union v. City of Houston, 330 F.3d 298, 301 (5th Cir.2003). Summary judgment is appropriate if "there is no genuine issue of material fact and [] the moving party is entitled to judgment as a matter of law." FED.R.CIV.P. 56(c). Wilson Jones raises two challenges to the district court judgment. First, Wilson Jones argues that the district court erred by upholding the PBGC order on a basis not articulated in the administrative record, which is not permitted under the arbitrary and capricious standard of review applicable to agency actions. Second, Wilson Jones challenges the district court's decision to defer to the PBGC's interpretation of the issues in this case, including the statutory definition of annuity starting date.

A

Wilson Jones argues that the PBGC's order requiring it to use the November 1995 rate to value its lump sum distributions must be overturned as "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(2)(A). See LTV Corp., 496 U.S. at 656, 110 S.Ct. 2668 (applying the § 706 arbitrary and capricious standard to PBGC actions). The arbitrary and capricious standard is "highly deferential." United States v. Garner, 767 F.2d 104, 116 (5th Cir.1985). We must "accord the agency's decision a presumption of regularity" and "we are prohibited from substituting our judgment for that of the agency." Id. (citing Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 415, 91 S.Ct. 814, 28 L.Ed.2d 136 (1971)) (quotations omitted).

Arbitrary and capricious review focuses on whether an agency articulated a rational connection between the facts found and the decision made, and "[i]t is well-established that an agency's action

Page 367

must be upheld if at all, on the basis articulated by the agency itself." Motor Vehicle Mfr.'s Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 42-43 & 50, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983). We must determine whether the agency action was based upon consideration of the appropriate factors. Id. at 42-43, 103 S.Ct. 2856. "Post-hoc explanations — especially those offered by appellate counsel — are simply an inadequate basis for review of an administrative decision." Garner,...

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26 practice notes
  • Safety Nat'l Cas. Corp. v. United States Dep't Of Homeland Sec., Civil Action No. H-05-cv-2159.
    • United States
    • United States District Courts. 5th Circuit. United States District Courts. 5th Circuit. Southern District of Texas
    • March 24, 2008
    ...standard of review is highly deferential, it is by no means a rubber stamp.” Pension Benefit Guar. Corp. v. Wilson N. Jones Mem'l Hosp., 374 F.3d 362, 366 (5th Cir.2004). Agency action is entitled to a presumption of regularity, but “that presumption is not to shield [its] action from a tho......
  • S.D. ex rel. Dickson v. Hood, No. 03-30007.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • November 15, 2004
    ...Univ. Hosp., 488 U.S. 204, 212-213, 109 S.Ct. 468, 102 L.Ed.2d 493 (1988); Pension Benefit Guaranty Corp. v. Wilson N. Jones Mem'l Hosp., 374 F.3d 362 (5th Cir.2004); Ass'n of Civilian Technicians, v. FLRA, 269 F.3d 1112, 1117 (D.C.Cir.2001). Consequently, we must reject LDHH appellate coun......
  • Indep. Turtle Farmers Of La. Inc v. U.S.A, Civil Action No. 1:07-cv-00856.
    • United States
    • U.S. District Court — Western District of Louisiana
    • March 30, 2010
    ...must begin by affording the FDA's decision a “ ‘presumption of regularity.’ ” Pension Ben. Guar. Corp. v. Wilson N. Jones Memorial Hosp., 374 F.3d 362, 366 (5th Cir.2004) (quoting United States v. Garner, 767 F.2d 104, 116 (5th Cir.1985)). Moreover, we must “limit our review to whether the ......
  • Knapp v. U.S. Dep't of Agric., No. 14-60002
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • July 31, 2015
    ...The arbitrary and capricious standard is "highly deferential." Pension Benefit Guar. Corp. v. Wilson N. Jones Mem'l Hosp., 374 F.3d 362, 366 (5th Cir. 2004) (internal quotation marks and citation omitted). "Arbitrary and capricious review focuses on whether an agency articula......
  • Request a trial to view additional results
26 cases
  • Safety Nat'l Cas. Corp. v. United States Dep't Of Homeland Sec., Civil Action No. H-05-cv-2159.
    • United States
    • United States District Courts. 5th Circuit. United States District Courts. 5th Circuit. Southern District of Texas
    • March 24, 2008
    ...standard of review is highly deferential, it is by no means a rubber stamp.” Pension Benefit Guar. Corp. v. Wilson N. Jones Mem'l Hosp., 374 F.3d 362, 366 (5th Cir.2004). Agency action is entitled to a presumption of regularity, but “that presumption is not to shield [its] action from a tho......
  • S.D. ex rel. Dickson v. Hood, No. 03-30007.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • November 15, 2004
    ...Univ. Hosp., 488 U.S. 204, 212-213, 109 S.Ct. 468, 102 L.Ed.2d 493 (1988); Pension Benefit Guaranty Corp. v. Wilson N. Jones Mem'l Hosp., 374 F.3d 362 (5th Cir.2004); Ass'n of Civilian Technicians, v. FLRA, 269 F.3d 1112, 1117 (D.C.Cir.2001). Consequently, we must reject LDHH appellate coun......
  • Indep. Turtle Farmers Of La. Inc v. U.S.A, Civil Action No. 1:07-cv-00856.
    • United States
    • U.S. District Court — Western District of Louisiana
    • March 30, 2010
    ...must begin by affording the FDA's decision a “ ‘presumption of regularity.’ ” Pension Ben. Guar. Corp. v. Wilson N. Jones Memorial Hosp., 374 F.3d 362, 366 (5th Cir.2004) (quoting United States v. Garner, 767 F.2d 104, 116 (5th Cir.1985)). Moreover, we must “limit our review to whether the ......
  • Knapp v. U.S. Dep't of Agric., No. 14-60002
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • July 31, 2015
    ...Cir. 1999). The arbitrary and capricious standard is "highly deferential." Pension Benefit Guar. Corp. v. Wilson N. Jones Mem'l Hosp., 374 F.3d 362, 366 (5th Cir. 2004) (internal quotation marks and citation omitted). "Arbitrary and capricious review focuses on whether an agency articulated......
  • Request a trial to view additional results

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