United Steel, Paper & Forestry, Rubber, Manufacturing, Energy, Allied Industrial & Serv. Workers Int'l Union, AFL–CIO–CLC v. Pension Benefit Guar. Corp.
| Decision Date | 20 March 2012 |
| Docket Number | Civil Action No. 09–517. |
| Citation | 52 Employee Benefits Cas. 2539,839 F.Supp.2d 232 |
| 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., Plaintiffs, v. PENSION BENEFIT GUARANTY CORPORATION, Defendant. |
| Court | U.S. District Court — District of Columbia |
OPINION TEXT STARTS HERE
Andrew Dean Roth, Jeremiah A. Collins, Daniel A. Zibel, Bredhoff & Kaiser, P.L.L.C., Norman Bay, U.S. Attorney's Office, Washington, DC, for Plaintiffs.
Israel Goldowitz, Nathaniel Rayle, Pension Benefit Guaranty Corporation Office of the Chief Counsel, Washington, DC, for Defendant.
In May 2003, the Thunderbird Mining Company (“Thunderbird”) filed for bankruptcy, stopped production at its iron ore facility, and placed nearly 400 hourly employees on indefinite temporary layoff. In light of Thunderbird's troubled business prospects, the Pension Benefit Guaranty Company (“PBGC”), in accordance with its statutory mandate to insure and protect pension benefits, moved to terminate the pension plan that Thunderbird had established for its hourly workers and have the PBGC appointed as statutory trustee of the plan. Plaintiffs in this case are former Thunderbird employees represented through their union representative who challenge the PBGC's denial, as administrator of the Thunderbird pension plan, of certain benefits to which they claim they are entitled under the plan. Specifically, the plaintiffs challenge the PBGC's determination that the Thunderbird facility had not undergone a “permanent shutdown” prior to termination of the pension plan and contend that the PBGC's denial of “shutdown benefits” to the plaintiffs was erroneous. Pending before the Court are cross-motions for summary judgment based on the administrative record. As explained below, the PBGC's determination that a “permanent shutdown” had not occurred prior to the plan termination date was not arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. Accordingly, the defendant's motion for summary judgment is granted and the plaintiffs' motion for summary judgment on liability is denied.
I. BACKGROUNDA. Regulatory Background
The PBGC is the federal agency created by the Employee Retirement Income Security Act of 1974 (“ERISA”) to insure certain private sector pension plans. 29 U.S.C. § 1302. It fulfills this responsibility by “(1) encouraging the continuation and maintenance of voluntary private pension plans for the benefit of their participants, (2) providing timely payments of benefits in the case of terminated pension plans, and (3) making the maximum use of its resources while at the same time maintaining premiums at the lowest levels consistent with its statutory responsibilities.” Pension Benefit Guar. Corp. v. Republic Techs. Int'l, LLC, 386 F.3d 659, 661 (6th Cir.2004); 29 U.S.C. § 1302(a)(1)-(3).
Among its functions, the PBGC guarantees benefits, within limits, to participants of a covered plan when that plan terminates with insufficient assets to cover its benefit liabilities. 29 U.S.C. § 1322. The agency may terminate a plan “involuntarily” when it determines that certain statutory criteria have been met, e.g., that the pension plan will be unable to pay benefits when due, or that the agency's possible long-run loss with respect to the plan “may reasonably be expected to increase unreasonably if the plan is not terminated.” 29 U.S.C. § 1342(a). “ERISA provides for involuntary termination proceedings precisely so that PBGC can protect its own financial interests and ‘avoid any unreasonable deterioration of the financial condition of the plan or any unreasonable increase in the liability of the fund.’ ” Republic Techs. Int'l, LLC, 386 F.3d at 668 (quoting 29 U.S.C. § 1342(c)).
The PBGC initiates the termination process by issuing a notice to the plan administrator of the PBGC's determination that the plan should be terminated. 29 U.S.C. § 1342(c). If the plan administrator challenges this determination, the PBGC “may, upon notice to the plan administrator, apply to the appropriate United States district court for a decree adjudicating that the plan must be terminated.” Id. When a plan is terminated involuntarily, the PBGC must also apply to the appropriate district court for the appointment of a trustee to administer the plan. 29 U.S.C. § 1342(b). ERISA permits the PBGC to serve as trustee to administer a plan in addition to its role as guarantor. Id. “The PBGC has applied to serve as trustee in every terminated plan, and courts typically grant its application.” Davis v. Pension Benefit Guar. Corp., 571 F.3d 1288, 1291 (D.C.Cir.2009) (citing Pineiro v. Pension Benefit Guar. Corp., 318 F.Supp.2d 67, 72 (S.D.N.Y.2003)).
“When serving as a statutory trustee, [the] PBGC wears two hats: one as guarantor of ERISA's insurance program and one as trustee.” Davis v. Pension Benefit Guar. Corp., 815 F.Supp.2d 283, 286 (D.D.C.2011) (internal citation and quotation omitted). As a trustee, the agency is responsible for administering benefits under the plan. 29 U.S.C. § 1342(d)(1)(B). The agency sends determination letters to plan participants who apply to the PBGC for benefits, and these decisions may be challenged before the PBGC Appeals Board. 29 C.F.R. §§ 4003.21, 4003.51. A decision by the Appeals Board constitutes the PBGC's final agency action, 29 C.F.R. § 4003.59(b), of which plan participants may seek judicial review. 29 U.S.C. § 1303(f).
B. Factual Background
Plaintiff United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial, and Service Workers International Union (“USW”) was for several decades the exclusive bargaining representative for the hourly employees of the Thunderbird Mining Company. Pls.' Statement of Material Facts, ECF No. 52, ¶ 1 ( ). In 1999, the plaintiff negotiated a pension agreement with Thunderbird under which Thunderbird sponsored an employee pension plan covered by Title IV of ERISA (the “Plan”). Am. Compl., ECF No. 13, ¶ 1; Pls.' SMF ¶ 3. The terms of the Plan provided for “shutdown pension benefits,” which are triggered when an employee's continuous service is broken due to the “permanent shutdown” of the Thunderbird facility.1 Pls.' SMF ¶ 20. The Plan did not, however, specifically define “permanent shutdown.” Id.
Located in Eveleth, Minnesota, Thunderbird employed approximately 400 hourly employees and provided low-grade iron ore in the form of taconite pellets for steel production. Id. ¶ 2. The company was a wholly owned subsidiary of Eveleth Mines, LLC (“EVTAC”),2 which itself was jointly owned by three steel companies: Rouge Steel, AK Steel, and Stelco. Id. ¶¶ 2, 5; Def.'s Statement of Material Facts, ECF No. 51, ¶¶ 10–11 (“Def.'s SMF”). These companies not only owned EVTAC, but were also EVTAC's sole customers for taconite pellets. Pls.' SMF ¶ 5, Def.'s SMF ¶ 11.
In early 2003, EVTAC suffered a drastic reduction in orders for its taconite pellets. Def.'s SMF ¶ 13. Rouge Steel began to purchase its taconite from a different company, Cleveland–Cliffs, Inc., while AK Steel began to purchase its ore requirements from Iron Ore Co. of Canada. Pls.' SMF ¶ 5; Def.'s SMF ¶¶ 4, 13. Stelco remained under a requirements contract with EVTAC for the first few months of 2003, but that contract expired on May 14, 2003, and was then renewed at a much lower requirement level. Def.'s SMF ¶ 14; AR 533.
Due to the loss of its biggest purchasers, on February 14, 2003, EVTAC sent a confidential letter to the local USW director advising the Union of its economic prospects. The letter from EVTAC's Manager of Employee Relations stated:
Regretfully, I must advise you that it is the intention of the Company to close permanently the Eveleth Mines LLC, dba EVTAC Mining operation. This action results from a lack of customer orders as of this date. The intended closure would commence on or about May 14, 2003. Pellet inventory shipments would be expected to continue past that date and conclude on or about July 12, 2003.
AR 451 (letter from John P. Baxter to David Foster). The letter invited USW representatives to “discuss the Company's proposed course of action and to provide information to the Company and suggest alternative courses.” AR 451.
On March 10, 2003, EVTAC distributed to its employees a Worker Adjustment and Retraining Notification (“WARN”) Act Notice advising them of a planned “Plant Closing or Mass Layoff” around May 15, 2003.3 AR 565; Def.'s SMF ¶ 15. The WARN Notice described the planned shutdown as “temporary (but only if pellet orders are received during shutdown period).” AR 464, 565; Pls.' SMF ¶ 7; Def.'s SMF ¶ 15–16.
In an effort to secure benefits for its employees, on March 17, 2003, EVTAC sent a “Petition for Trade Adjustment Assistance” to the United States Department of Labor (“DOL”).4 Pls.' SMF ¶ 8. The March 17 petition indicated that the plant would close on May 15, 2003, that 446 employees would be affected, and that job losses were due to the company “losing sales to customers importing products from a foreign country.” AR 460, 464 (Petition for Trade Adjustment Assistance). The petition further stated that the plant “closure will be permanent if no additional orders are received.” AR 460, 464. The DOL, however, denied the petition. AR 465–66 (Letter from John P. Baxter to DOL requesting reconsideration).
On May 1, 2003, EVTAC filed for bankruptcy pursuant to Chapter 11 of the Bankruptcy Code. AR 588; Pls.' SMF ¶ 9. Thunderbird filed for bankruptcy two weeks later on May 15, 2003. AR 596; Pls.' SMF ¶ 9. The following day, on May 16, 2003, EVTAC suspended its mining and taconite production operations and all but four of EVTAC's approximately 400 hourly employees were placed on...
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