United Steel, Paper & Forestry, Rubber, Mfg., Energy, Allied Indus. & Serv. Workers Int'l Union, AFL-CIO-CLC v. Pension Benefit Guar. Corp.

• Citation: 707 F.3d 319
• Decision Date: 11 January 2013
• Docket Number: No. 12–5116.,12–5116.
• Parties: UNITED STEEL, PAPER AND FORESTRY, RUBBER, MANUFACTURING, ENERGY, ALLIED INDUSTRIAL AND SERVICE WORKERS INTERNATIONAL UNION, AFL–CIO–CLC, on behalf of the Participants and Beneficiaries of the Thunderbird Mining Co. Pension Plan, et al., Appellants v. PENSION BENEFIT GUARANTY CORPORATION, Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (District of Columbia)

707 F.3d 319

UNITED STEEL, PAPER AND FORESTRY, RUBBER, MANUFACTURING, ENERGY, ALLIED INDUSTRIAL AND SERVICE WORKERS INTERNATIONAL UNION, AFL–CIO–CLC, on behalf of the Participants and Beneficiaries of the Thunderbird Mining Co. Pension Plan, et al., Appellants

v.PENSION BENEFIT GUARANTY CORPORATION, Appellee.

No. 12–5116.

United States Court of Appeals,District of Columbia Circuit.

Argued Nov. 5, 2012.

Decided Jan. 11, 2013.

Appeal from the United States District Court for the District of Columbia (No. 1:09–cv–00517).

Andrew D. Roth argued the cause for appellant. With him on the briefs were Laurence Gold and David R. Jury. Jeremiah A. Collins entered an appearance.

Kenneth J. Cooper, Assistant General Counsel, Pension Benefit Guaranty Corporation, argued the cause for appellee. With him on the brief were Judith R. Starr, General Counsel, Kimberly J. Duplechain, Attorney, Israel Goldowitz, Chief Counsel, Karen L. Morris, Deputy Chief Counsel, Kartar S. Khalsa, Assistant Chief Counsel, and Nathaniel Rayle, Attorney.

Before: GARLAND and KAVANAUGH, Circuit Judges, and RANDOLPH, Senior Circuit Judge.

Opinion for the Court filed by Senior Circuit Judge RANDOLPH.

RANDOLPH, Senior Circuit Judge:

This is an appeal from the district court's judgment affirming a decision of the Pension Benefit Guaranty Corporation, the government agency that administers pension termination insurance under Title IV of the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. §§ 1001–1461, commonly known as ERISA. In this case, participants in the Thunderbird Mining Company Pension Plan sought “shutdown” pension benefits. These early retirement benefits are triggeredby a “permanent shutdown of a plant, department or subdivision thereof” and are payable to plan participants who meet certain age and years-of-service requirements.¹ The agency denied the participants' requests.

Eveleth Mines, LLC, doing business as EVTAC Mining, and its wholly owned subsidiary, Thunderbird Mining Company (we refer to the two companies collectively as “Eveleth”), produced taconite pellets in a plant in Minnesota. Taconite pellets are used in the production of iron and steel. In early 2003, Eveleth suffered a drastic reduction in orders when two of its primary customers (joint owners of an approximately 85 percent interest in Eveleth) decided to begin purchasing taconite pellets from other sources.

On February 14, 2003, Eveleth sent a confidential letter to the local district director of the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, AFL–CIO–CLC, the union representing Eveleth's approximately four hundred hourly employees. Citing a “lack of customer orders,” the letter advised the union of the company's intention to “close permanently” the mining operation “on or about May 14, 2003.” The company noted that it was prepared to discuss its proposed course of action and invited the union to “suggest alternative courses.”

Unable to secure new orders, Eveleth filed for bankruptcy under Chapter 11 of the Bankruptcy Code,² and on May 15, 2003, ceased production and laid off all but four of its hourly employees. According to a March 10, 2003, notice that Eveleth issued to its employees,³ the closure was expected to be temporary, “but only if anticipated pellet orders are received during the shutdown period.”

In connection with the shutdown, management instructed the four remaining hourly employees (and twenty-nine salaried employees) to secure the plant site by, among other things, welding shut the doors and gates, repairing damaged equipment and plumbing, shutting off the electricity, and disconnecting the batteries in equipment and vehicles. The plant had been temporarily shut down in the past, and similar work had been performed. But unlike during prior shutdowns, during this shutdown the plant was not maintained in “standby condition.” On June 15, 2003, after this work was completed, Eveleth laid off the four remaining hourly employees, but retained a staff of salaried employees to handle administrative tasks and prevent fire and flooding. In a subsequent filing with the bankruptcy court (in October), the company stated that it “continue[d]to maintain the equipment and other assets associated with its mining operations to protect the enterprise value of its estate” while it sought a purchaser or funding for a plan of reorganization.

On July 5, 2003, Eveleth's president and the local union president met with Jim Oberstar, then a congressman from Minnesota, and discussed Eveleth's failure to secure new sales contracts. The congressman, who knew the Chinese ambassador to the United States, recommended that Eveleth negotiate with Laiwu, a Chinese corporation, to either secure new sales contracts or sell the company's assets. About three months later, in early October, Laiwu and an Ohio mining company offered to purchase Eveleth's assets, with the intention of operating the plant and producing taconite pellets. The proposed sale terms required Eveleth “to restore its mining operations to operating condition consistent with industry practice” in advance of the proposed closing on December 1, 2003. The bankruptcy court approved the sale on November 25, 2003, and the transaction closed on December 1, 2003. On that date, Eveleth permanently laid off all of its employees except three members of management. During the month of December, the purchasers hired substantially all of the company's former hourly employees under the terms of a new collective bargaining agreement.

Meanwhile, after receiving notice of Eveleth's bankruptcy filing in May, the Pension Benefit Guaranty Corporation began analyzing the company's prospects and its ability to sustain its pension plan. The pension-guaranty agency insures participants in defined-benefit pension plans, such as the plan participants in this action, against the loss of certain benefits when the plan lacks sufficient assets to pay promised benefits in full. Subject to certain limitations, when an underfunded pension plan is terminated, the agency guarantees the payment of “nonforfeitable” benefits (i.e., those benefits for which a participant has satisfied the conditions for entitlement under the terms of the plan, as of the date of termination, see29 U.S.C. § 1301(a)(8)). See id. § 1322; see also PBGC v. LTV Corp., 496 U.S. 633, 636–38, 110 S.Ct. 2668, 110 L.Ed.2d 579 (1990). (This insurance is funded, in part, from premiums paid by employers who sponsor covered pension plans, see29 U.S.C. §§ 1306, 1307, and recoveries from employers whose underfunded plans have terminated, see id. § 1362.) If the agency determines that a pension plan will be unable to pay benefits when due or that the agency's loss with respect to the plan will increase unreasonably if the plan is not terminated, the agency may initiate proceedings to terminate the plan. See29 U.S.C. § 1342(a)(2), (4).

Having determined that Eveleth's pension plan had a “funded ratio” of only 52 percent and that Eveleth had “no realistic prospect of adequately funding it,” the agency concluded that the plan would be unable to pay benefits when due. The agency also concluded that its long-run loss with respect to the plan would increase unreasonably if the plan was not soon terminated. This was largely because, after Eveleth's bankruptcy filing and the cessation of production in May 2003, laid-off employees had submitted applications for shutdown pension benefits, asserting that their employer had permanently ceased operations. While Eveleth, in its role as plan administrator, took the position that the shutdown was only temporary and thus denied such benefits, the agency believed there was a strong possibility that the shutdown would soon become permanent. The agency determined that upon such a permanent shutdown, the plan would owe an additional $70 million in benefits, of which about $35 million would be guaranteed by the agency. In addition, as of August 1, 2003, the “phase in” of an earlier benefit increase was estimated to increase guaranteed, but unfunded, benefits by approximately $1.6 million.

Accordingly, on July 24, 2003, the agency filed an action in federal district court, pursuant to 29 U.S.C. § 1342(c), seeking to terminate the plan and to establish July 24, 2003, as the plan termination date. As has been its practice, see Boivin v. U.S. Airways, Inc., 446 F.3d 148, 150–51 (D.C.Cir.2006), the agency asked that the court appoint it as the trustee of the plan. While neither Eveleth, as plan administrator, nor the union opposed termination of the plan or the agency's appointment as trustee, the union intervened in the action to oppose the proposed termination date as “not ... in the best interests of the participants of [the] plan.” Later the union withdrew its opposition to the proposed termination date after reaching an agreement with Eveleth relating to the sale of Eveleth's assets. On August 19, 2004, the district court issued an order terminating the plan, appointing the agency as trustee, and establishing July 24, 2003, as the plan termination date.

From December 2006 to May 2007, the agency issued benefit-determination letters setting forth the monthly payment each plan participant was entitled to receive. None of the benefits determinations included shutdown benefits. The union therefore filed an administrative appeal on behalf of approximately 240 participants who believed they were eligible for shutdown benefits. On November 30, 2007, the agency's Appeals Board issued a final decision concluding that the agency would not guarantee shutdown benefits for plan participants because Eveleth had not permanently shut down before the plan was terminated on July 24, 2003.

The union, on behalf of employees who claimed to be eligible for shutdown pension benefits, and several individual employees, brought this action in district court under 29 U.S.C. §...