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Thomas G. Davis, et al v. Pension Benefit Guaranty Corporation

September 30, 2011

THOMAS G. DAVIS, ET AL., PLAINTIFFS,
v.
PENSION BENEFIT GUARANTY CORPORATION, DEFENDANT.



The opinion of the court was delivered by: Henry H. Kennedy, Jr. United States District Judge

MEMORANDUM OPINION AND ORDER

Before the Court are the parties' cross-motions for summary judgment [## 45, 54] on claim eight of plaintiffs' second amended complaint, which alleges that defendant Pension Benefit Guaranty Corporation ("PBGC"), in its role as statutory trustee of plaintiffs' pension plan, erroneously interpreted the "minimum benefit" provision thereof. Both motions will be denied without prejudice because plaintiffs' improper reliance on extra-record materials prevents the Court from fairly adjudicating the merits of the parties' motions.

I. BACKGROUND

Plaintiffs are a group of more than 1,700 US Airways pilots, mostly now retired. In 2003, thanks to US Airways's bankruptcy, PBGC became the statutory trustee of plaintiffs' pension plan ("the Plan"), a role it typically takes on when a pension plan covered by the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq., terminates without enough assets to pay all of its promised benefits. See Boivin v. U.S. Airways, Inc., 446 F.3d 148, 150--51 (D.C. Cir. 2006). When serving as a statutory trustee, PBGC "wears two hats: one as guarantor of ERISA's insurance program . . . and one as trustee." Wilmington Shipping Co. v. New England Life Ins. Co., 496 F.3d 326, 331 (4th Cir. 2007).

After becoming the Plan's trustee, PBGC issued final benefit determinations, which, plaintiffs allege, provided lesser benefits than the Plan and ERISA entitled the pilots to receive. In March 2007, a number of pilots filed a consolidated administrative appeal with PBGC, arguing, inter alia, that PBGC had improperly applied the Plan's "minimum benefit provision." A.R. at 243--57 [#48-4]. In short, the minimum benefit provision guarantees pilots who were beneficiaries of the Plan's predecessor, which was replaced in 1973, the greater of: (1) the normal fixed benefit provided by the current plan; or (2) "that to which he would have been entitled . . . had the Prior Plan continued in effect without change," with certain adjustments.

A.R. at 623 [#49-3].

In February 2008, PBGC's Appeals Board issued a final decision on most of the pilots' claims, including their minimum benefit claim. A.R. at 2--220 [#48]. The Board determined that the pilots' arguments were foreclosed by the language of the minimum benefit provision and US Airways' longstanding interpretation thereof. A.R. at 29--36 [#48]. Plaintiffs then filed this suit, challenging the Board's determination as contrary to the Plan's language and ERISA.

II. ANALYSIS

In March 2010, plaintiffs filed their motion for summary judgment on claim eight, which deals with the minimum benefit provision. They attached a statement of material facts not in genuine dispute, which is required by the Local Rules in most civil actions, and numerous exhibits. PBGC then filed the administrative record [## 48--53] and its cross-motion, which not only opposes plaintiffs' arguments on the merits but also contends that plaintiffs erred by treating this as a typical civil case, rather than an action seeking judicial review of agency action, which follows different procedures. Specifically, PBGC argues that: (1) the Court's review is limited to determining whether the Board's decision was arbitrary, capricious, or an abuse of discretion in the meaning of the Administrative Procedure Act ("APA"), 5 U.S.C. § 702(a)(2), and (2) the Court's review is restricted to the administrative record filed by PBGC. PBGC is correct on both counts.

A. Standard of Review

Plaintiffs bring their claims under 29 U.S.C. 1303(f), which provides in relevant part that "any . . . participant, or beneficiary, [who] is adversely affected by any action of [PBGC] with respect to a plan in which such person has an interest . . . may bring an action against the corporation for appropriate equitable relief in the appropriate court." 29 U.S.C. § 1303(f)(1). Section 1303(f) does not state a standard of review.

Plaintiffs argue that the Court should apply the standard that governs ERISA suits against private administrators or fiduciaries pursuant to 29 U.S.C. § 1132(a)(1)(B). In such cases, "the standard of review - variously described by the [Supreme] Court as 'arbitrary and capricious' and 'abuse of discretion' review - is plainly deferential." Wagener v. SBC Pension Benefit Plan-Non Bargained Program, 407 F.3d 395, 402 (D.C. Cir. 2005) (quoting Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 111--15 (1989)). PBGC contends that, because it is a government agency, its actions should be reviewed under the standard provided by the APA, which similarly requires the Court to set aside actions that are "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(a)(2). The parties thus agree on the baseline standard of review. They diverge, however, on whether the Court should consider whether PBGC is operating under a conflict of interest. Under plaintiffs' proposed standard, the Court's deference wanes where "an administrator or fiduciary . . . is operating under a conflict of interest"; in that situation, "that conflict must be weighed as a 'facto[r] in determining whether there is an abuse of discretion.'" Firestone, 489 U.S. at 115 (quoting RESTATEMENT (SECOND) OF TRUSTS § 187 cmt. d (1959)) (alteration in original); see also Metro.

Life Ins. Co. v. Glenn, 554 U.S. 105, 112 (2008) (holding that a conflict of interest exists where an employer both evaluates and pays benefits claims).*fn1 PBGC responds that, because the APA governs here, plaintiffs' proposed conflict analysis is inapplicable. The Court agrees with PBGC.

As the Court has previously explained in a case involving PBGC, "[i]n general, where an act of Congress does not specify a standard for judicial review, the court must apply the familiar deferential standard of the APA and ask whether the agency's action was 'arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.'" Sara Lee Corp. v. Am. Bakers Ass'n Ret. Plan, 512 F. Supp. 2d 32, 37 (D.D.C. 2007) (quoting 5 U.S.C. ยง 706(2)(A)). Other Courts have likewise determined that PBGC's "decisions generally are reviewable under the standard set out in the Administrative ...


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