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Stephens v. US Airways Group

May 20, 2008


The opinion of the court was delivered by: Rosemary M. Collyer United States District Judge


J.C. Stephens retired on December 1, 1996, as a pilot for US Airways. He did not receive his lump-sum distribution from his retirement plan until January 14, 1997. He unsuccessfully demanded interest on the withheld monies and eventually, with three similarly-situated former pilots,*fn1 sued US Airways Group, Inc. ("US Airways"). The district court in the Northern District of Ohio dismissed the suit and Plaintiffs appealed. US Airways then twice filed for bankruptcy protection and Plaintiffs' suit was stayed by the United States Court of Appeals for the Sixth Circuit. During the course of bankruptcy, the retirement plan was terminated and the Pension Benefit Guarantee Corporation ("PBGC" or the "corporation") became its statutory trustee. The Sixth Circuit reversed in part and remanded to the district court; PBGC argued that venue in the Northern District of Ohio was improper and the case was transferred to this Court.

PBGC*fn2 now moves to dismiss in part, arguing that it cannot be liable for any fiduciary breach on a mere claim for unpaid benefits, for attorneys' fees, or to pilots who received their lump-sum retirement benefits too long ago to be part of a putative class. See Def.'s First Am. Mot. to Dismiss Pls.' Third Am. Compl. ("Def.'s Mem.") [Dkt. # 5]. While this Court agrees on the first two points, it is premature to decide the last.


US Airways was the contributing sponsor and plan administrator of the Retirement Income Plan for Pilots of U.S. Air, Inc. ("Plan"). Plaintiffs are four retired pilots of US Airways who seek to represent a class consisting of pilots who elected to receive a lump-sum payment of retirement benefits from the Plan between January 1, 1990 and December 31, 2003. They filed a complaint against US Airways and the Plan in the Northern District of Ohio on January 18, 2000, alleging that US Airways improperly delayed distribution of their lump-sum benefits for up to 45 days after the Plan's required date for commencing the payment of retirement income. The Plan required that lump-sum payment be made "commencing on the first day of the month coinciding with or next following [the] Normal Retirement Date."*fn3 Third Am. Compl. ("Compl.") ¶ 22. Alternatively, under the Plan, a participant entering into early retirement may have elected "to begin receiving this retirement income on the first day of any month between the date he retires from the employ of the Employer and his Normal Retirement Date." Id. ¶ 23. Thus, under the terms of the Plan, lump-sum payments were to be made on the "Actual Retirement Date," that is, the first day of the month coinciding with or following the participant's 60th birthday (or, alternatively, for Participants electing early retirement, on the first day of any month elected by the Participant between the date he or she retired and the Normal Retirement Date). Id. ¶ 24. However, US Airways and the Plan "adhered to a policy of withholding the lump-sum payments for 45 days past the first day of the month coinciding with or following a pilot's retirement. This policy was enacted pursuant to an oral understanding with the Airline Pilots Association. Plaintiffs did not receive their lump-sum distributions until approximately 45 days after they were due." Pls.' Opp'n to Def.'s First Am. Mot. to Dismiss Pls.' Third Am. Compl. ("Pls.' Opp'n") [Dkt. # 6] at 2 (citing Compl. ¶¶ 32, 44, 53 & 62).

On July 25, 2001, the Northern District of Ohio granted US Airways' and the Plan's Motion to Dismiss on the basis of lack of subject matter jurisdiction; the district court held that each of Plaintiffs' claims required an interpretation of the Retirement Plan, which was a matter of exclusive jurisdiction for the Retirement Board.*fn4 Plaintiffs appealed to the Sixth Circuit, but US Airways filed the first of two bankruptcy petitions on August 11, 2002, and the Sixth Circuit stayed the case until US Airways emerged from its second bankruptcy proceeding in 2005.

In the meantime, pursuant to Title IV of the Employee Retirement Income Security Act of 1974 ("ERISA"),*fn5 and an agreement between US Airways and PBCG, the Plan was terminated effective March 31, 2003, because its assets were inadequate to pay its liabilities. On that same date, PBGC became the statutory trustee of the Plan and is now paying its benefits, within the limits of Title IV. PBGC is also acting as the guarantor of Title IV benefits that the terminated Plan owes and will owe to participants and their beneficiaries.

PBGC's counsel was substituted as counsel for the Plan before the Sixth Circuit. On September 13, 2006, the appellate court affirmed the district court's ruling on two of the fiduciary breach counts and reversed on the remaining four counts. See Stephens v. Ret. Income Plan for Pilots of U.S. Air, Inc., 464 F.3d 606 (6th Cir. 2006). On remand, Plaintiffs filed the Third Amended Class Action Complaint against PBGC as trustee of the Plan and as the alleged successor-in-interest to the Plan. PBGC filed a motion to dismiss, which included a contention of improper venue. The district court in the Northern District of Ohio ordered the case transferred to the United States District Court for the District of Columbia, without ruling on the merits.

In the Third Amended Complaint, Plaintiffs seek monetary damages, restitution and/or disgorgement, and attorneys' fees and costs against PBGC. The Complaint retains two unpaid benefit counts previously pending against US Airways and the Plan, now asserted against PBGC as successor-in-interest to the Plan (Counts I and II), and adds one co-fiduciary breach count against PBGC (Count III). In Count I, Plaintiffs allege that the Plan language required the distribution of a lump sum benefit on the participant's Actual Retirement Date. Compl. ¶¶ 65-70. They complain that US Airways' practice was to distribute the lump sum benefits within 45 days after the Actual Retirement Date without paying interest. In Count II, Plaintiffs allege that US Airways' practice of delaying the distribution of lump sum benefits violated Title I of ERISA, 29 U.S.C. §§ 1054(c)(3) and 1055, because the present value of the sums actually received was not the actuarial equivalent of the present value as of the participants' normal retirement date. Id. ¶¶ 72-74. Finally, Count III alleges that PBGC violated its duties as a successor fiduciary because it knew that US Airways had breached its fiduciary duties to the Plan and did not rectify those breaches. Id. ¶¶ 76-79.


ERISA, 29 U.S.C. § 1342(d), sets forth the powers and responsibilities of a statutory trustee of a terminated plan. In § 1342(d)(1), Congress specifically conferred power on the statutory trustee of a terminated plan "to do any act authorized by the plan or this title to be done by the plan administrator or any trustee of the plan." 29 U.S.C. § 1342(d)(1). Pursuant to this statute and implementing regulations, the statutory trustee is authorized to determine liabilities for unpaid benefit payments due before termination and to pay them from plan assets. See 29 CFR § 4044.3(a); 29 U.S.C. § 1344(a). As statutory trustee, PBGC is a "fiduciary within the meaning of paragraph (21) of section 1002 of [Title IV]." 29 U.S.C. § 1342(d)(3). Any participant or beneficiary who is adversely affected by an action of PBGC with respect to a plan in which the participant has an interest may bring an action against PBGC under § 1303(f). See id. §§ 1303(f)(1) & (f)(6). Section 1303(f) provides: "This subsection shall be the exclusive means for bringing actions against [PBGC] under this subchapter, including actions against [PBGC] in its capacity as a trustee under section 1342 or 1349 of this title." Id. § 1303(f)(4).

In an action brought under § 1303(f), the court may award "costs and expenses incurred in connection with such action" to the prevailing party, but § 1303(f)(3) makes no mention of attorneys' fees. See id. § 1303(f).


PBGC moves to dismiss three aspects of the Complaint under Federal Rule of Civil Procedure 12(b)(6). Specifically, PBGC moves to dismiss Count III, arguing that Plaintiffs have an adequate remedy at law for their "mere denial of benefits" claim; PBGC moves to dismiss Plaintiffs' request for attorneys' fees; and PBGC seeks to limit the ...

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