Joseph Fisher v. PBGC ( 2021 )

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued February 5, 2021 Decided April 20, 2021
No. 20-7063
JOSEPH V. FISHER,
APPELLANT
v.
PENSION BENEFIT GUARANTY CORPORATION ,
APPELLEE
Appeal from the United States District Court
for the District of Columbia
(No. 1:14-cv-01275)
Alison S. Gaffney argued the cause for appellant. With her
on the briefs were David S. Preminger, George M. Chuzi, and
Lynn Lincoln Sarko.
Kenneth J. Cooper, Assistant General Counsel, Pension
Benefit Guaranty Corporation, argued the cause for appellee.
With him on the brief was Mark R. Snyder, Attorney.
Before: ROGERS and KATSAS, Circuit Judges, and
SENTELLE , Senior Circuit Judge.
Opinion for the Court by Circuit Judge ROGERS.
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ROGERS, Circuit Judge: This case concerns the Pension
Benefit Guaranty Corporation’s (“PBGC”) 2016 denial of
appellant’s request for lumpsum payment of his pension
benefits. After the district court vacated PBGC’s 2011 denial
of the same request, PBGC’s 2016 remand decision featured a
new rationale for denial based on 29 C.F.R. § 4044.4(b).
Because PBGC’s 2016 decision was a new agency action, the
court reviews PBGC’s rationale and now concludes that
appellant’s challenges to this rationale lack merit.
Accordingly, we affirm the district court’s grant of summary
judgment to PBGC.
I.
A.
Among the “principal purposes” of the Employee
Retirement Income Security Act of 1974 (“ERISA”), 88 Stat.
829, 29 U.S.C. § 1001 et seq., “was to ensure that employees
and their beneficiaries would not be deprived of anticipated
retirement benefits by the termination of pension plans before
sufficient funds have been accumulated in the plans.” PBGC
v. R.A. Gray & Co., 467 U.S. 717, 720 (1984) (citing Nachman
Corp. v. PBGC, 446 U.S. 359, 361–62 (1980)). “Toward this
end, Title IV of ERISA, 29 U.S.C. § 1301 et seq., created a plan
termination insurance program, administered by the Pension
Benefit Guaranty Corporation (PBGC), a wholly owned
Government corporation within the Department of Labor,
§ 1302.” Id. This plan guarantees a class of “nonforfeitable
benefits,” 29 U.S.C. § 1322(a), “reimbursing eligible
participants or beneficiaries when a guaranteed plan terminates
without sufficient funds,” Davis v. PBGC, 734 F.3d 1161, 1164
(D.C. Cir. 2013).
“If an employer wishes to terminate a plan whose assets
are insufficient to pay all benefits, the employer must
3
demonstrate that it is in financial ‘distress.’” PBGC v. LTV
Corp., 496 U.S. 633, 639 (1990); see 29 U.S.C. § 1341(c). To
terminate under a “distress termination,” the employer must
provide a “60-day advance notice of intent to terminate”
(“NOIT”) to all affected parties, including plan participants and
PBGC. 29 U.S.C. § 1341(c)(1)(A). If PBGC determines that
the plan lacks sufficient assets to satisfy its pension obligations,
“PBGC becomes trustee of the plan, taking over the plan’s
assets and liabilities.” LTV Corp., 496 U.S. at 637; see 29
U.S.C. § 1342(c). “As trustee, the PBGC administers the
plan—i.e., determines who is entitled to benefits, see 29 U.S.C.
§ 1342(d), and acts as a fiduciary with respect to the plan, see
id. §§ 1342(d)(3), 1002(21).” Davis, 734 F.3d at 1165.
ERISA requires plan administrators to allocate the plan’s
assets among participants pursuant to six categories, which
establish a descending order of priority. See 29 U.S.C. § 1344;
Lewis v. PBGC, 912 F.3d 605, 607 (D.C. Cir. 2018). As
relevant, administrators of plans entering distress termination
must pay “benefits attributable to employer contributions . . .
only in the form of an annuity,” 29 U.S.C.
§ 1341(c)(3)(D)(ii)(II), during the period “commencing on the
date on which the plan administrator provides a notice of
distress termination” to PBGC and ending on the date on which
PBGC issues a notice determining the plan’s eligibility for
distress termination, id. § 1341(c)(3)(D)(i)(I). PBGC’s
regulation implementing 29 U.S.C. § 1344 further prohibits a
“distribution, transfer, or allocation of assets to a participant”
that contravenes the six-category priority scheme and is “made
in anticipation of plan termination.” 29 C.F.R. § 4044.4(b). To
determine whether a distribution has been made “in
anticipation of plan termination,” the regulation states that
PBGC “will consider all of the facts and circumstances
including — (1) Any change in funding or operation
procedures; (2) Past practice with regard to employee requests
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for forms of distributions; (3) Whether the distribution is
consistent with plan provisions; and (4) Whether an annuity
contract that provides for a cutback based on [specified]
guarantee limits . . . could have been purchased from an
insurance company.” Id.B.
Appellant is a former executive of The Penn Traffic
Company (“Penn Traffic”) who earned a pension under The
Penn Traffic Company Cash Balance Pension Plan (“the
Plan”), which is subject to ERISA. In May 2003, Penn Traffic
filed for bankruptcy. A few months later, in August 2003,
appellant resigned and filed an application for retirement
benefits pursuant to the Plan, electing to receive his benefits in
the form of a single lumpsum payment. In September 2003,
Penn Traffic’s Board of Directors voted to terminate the Plan.
In October 2003, the Plan’s Administrative Committee
informed appellant that, given the Plan’s impeding termination,
his request for lumpsum payment had been denied. PBGC
received the Plan’s formal NOIT in November 2003 and
became the Plan’s trustee in February 2005.
In December 2009, PBGC sent appellant a benefit
determination letter, explaining its calculation of a monthly
annuity benefit. The next month, appellant appealed PBGC’s
determination that his benefit was payable as a monthly annuity
rather than a lumpsum. In September 2011, the PBGC Appeals
Board denied appellant’s appeal, primarily relying on Policy
5.4-9, Section D.1 of PBGC’s Operating Policy Manual.
Appellant filed an action in federal district court
challenging the 2011 decision. See 29 U.S.C. § 1303(f)(1).
The district court held that the 2011 decision failed to
adequately justify its denial of appellant’s request for lumpsum
payment. See Fisher v. PBGC, 151 F. Supp. 3d 159, 161
5
(D.D.C. 2016). It reasoned that the PBGC Appeals Board
failed to consider whether the application of Policy 5.4-9 to
appellant’s request was consistent with the text of ERISA, and
“wholly ignore[d]” whether and how 29 C.F.R. § 4044.4 might
apply to appellant’s request. Id. at 166–67. The district court
therefore vacated the 2011 decision and remanded to PBGC for
further proceedings. Id. at 168.
In July 2016, the PBGC Appeals Board again denied
appellant’s lumpsum request. This time its reasoning focused
on 29 C.F.R. § 4044.4 rather than Policy 5.4-9. Specifically, it
concluded that § 4044.4(b), which prohibits certain lumpsum
distributions “in anticipation of plan termination,” was “a valid
exercise of PBGC’s rulemaking authority” and applied to
appellant’s lumpsum request. PBGC Appeals Board, Remand
2016-0147, Joseph V. Fisher, Case No. 200185, at 3–4 (July
22, 2016) (hereinafter, 2016 Remand Decision). Although
stating that “PBGC Policy 5.4-9 further supports the denial of
[appellant’s] lump-sum payment request,” it did not follow the
district court’s remand instructions to explain how the
application of Policy 5.4-9 to appellant’s request was
consistent with ERISA. Id. at 30.
In April 2019, appellant amended his complaint to seek
judicial review of the 2016 Remand Decision. Concluding that
the 2016 decision properly relied on 29 C.F.R. § 4044.4(b) to
deny appellant’s lumpsum request, the district court granted
summary judgment to PBGC. See Fisher v. PBGC, 468 F.
Supp. 3d 7, 28 (D.D.C. 2020). Appellant appeals, and our
review is de novo. Allied Pilots Ass’n v. PBGC, 334 F.3d 93,
97 (D.C. Cir. 2003).
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II.
As a threshold matter, appellant maintains that the court
must disregard the 2016 Remand Decision’s reasoning based
on 29 C.F.R. § 4044.4(b). In his view, the district court erred
in remanding to PBGC in the first instance, and even if remand
was appropriate, the PBGC Appeals Board’s 2016 decision
was not a new agency action and therefore its reliance on
§ 4044.4(b), which the Appeals Board’s 2011 decision did not
mention, constitutes an impermissible post hoc rationalization.
Neither contention has merit.
Ordinarily, “if the reviewing court simply cannot evaluate
the challenged agency action on the basis of the record before
it, the proper course . . . is to remand to the agency for
additional investigation or explanation.” Fla. Power & Light
Co. v. Lorion, 470 U.S. 729, 744 (1985); see also LTV Corp.,
496 U.S. at 654; SEC v. Chenery Corp., 318 U.S. 80, 94–95
(1943). In rare circumstances, when “a remand would be futile
on certain matters as only one disposition is possible as a matter
of law,” courts “retain and decide the issue.” George Hyman
Const. Co. v. Brooks, 963 F.2d 1532, 1539 (D.C. Cir. 1992).
Here, the district court concluded that PBGC’s application of
Policy 5.4-9 to appellant’s lumpsum request was “in at least
some tension with” ERISA’s text, while acknowledging that
PBGC’s interpretation of ERISA “may even be right.” Fisher,
151 F. Supp. 3d at 167. Concluding that the PBGC Appeals
Board’s 2011 decision did not adequately explain how its
application of Policy 5.4-9 was consistent with ERISA, the
district court followed the “proper course” by remanding to
PBGC. Fla. Power & Light Co., 470 U.S. at 744.
“[A] court may remand for the agency to do one of two
things.” Dep’t of Homeland Sec. v. Regents of the Univ. of
California, 140 S. Ct. 1891, 1907 (2020). If the agency
7
chooses to offer “a fuller explanation of the agency’s reasoning
at the time of the agency action,” it may not provide new
reasons for that action. Id. at 1907–08 (quoting LTV Corp., 496
U.S. at 654). Alternatively, if the agency chooses to “‘deal with
the problem afresh’ by taking new agency action,” it is “not
limited to its prior reasons but must comply with the procedural
requirements for new agency action.” Id. at 1908 (quoting SEC
v. Chenery Corp., 332 U.S. 194, 201 (1947)).
Therefore, the district court’s remand presented the PBGC
Appeals Board with a choice: either rest on its 2011 decision
while elaborating on its prior reasoning, or issue a new decision
featuring additional reasons absent from its 2011 decision.
Contrary to appellant’s view, the PBGC Appeals Board chose
the second option. Although its 2016 decision claimed to
“modif[y]” the 2011 decision by “more fully responding” and
“providing a revised and more complete explanation,” its
substance made clear that it was a new agency action. See 2016
Remand Decision at 1, 30. The 2016 decision was styled as a
“final agency action” and did not purport to justify a
predetermined outcome. See id. at 1, 31. Rather, it reexamined
the administrative record and dealt with appellant’s appeal
“afresh.” Regents, 140 S. Ct. at 1908 (quoting Chenery Corp.,
332 U.S. at 201).
That PBGC did not give appellant the opportunity to
submit a new appeal-letter brief or exhibits is immaterial. See
Appellant Br. 31. The PBGC Appeals Board reasonably relied
on the administrative record associated with appellant’s 2010
appeal letter insofar as the issues identified by the district court
in remanding had been fully briefed. This record included
appellant’s 2010 appeal-letter brief to the PBGC Appeals
Board and two appeal letters to Penn Traffic, all of which stated
appellant’s position on 29 U.S.C. § 4044.4(b). Appellant
acknowledges that the factual record before the PBGC Appeals
8
Board was fully developed and suggests no procedural
irregularities. See Appellant Br. 17, 21. Moreover, he provides
no authority for his proposition that the PBGC Appeals Board
was required to consider a renewed appeal. See id. 30–31. In
these circumstances, the court accepts that PBGC complied
with the procedural requirements for new agency action. See
Regents, 140 S. Ct. at 1908.
III.
Appellant contends that PBGC’s reliance on 29 C.F.R.
§ 4044.4(b), even if properly before the court, does not support
denial of his lumpsum request. First, he maintains that
§ 4044.4(b), which prohibits certain lumpsum distributions “in
anticipation of plan termination,” is ultra vires because it
contravenes the plain text of ERISA, 29 U.S.C. § 1341(c),
which prohibits only post-NOIT lumpsum distributions. See
Appellant Br. 46–53. Second, he maintains that § 4044.4(b),
by its own terms, was inapplicable to his request. See id. 54–
56. Appellant’s contentions lack merit.
A.
To determine whether § 4044.4(b) is consistent with
ERISA, the court applies the familiar Chevron two-step
framework. See LTV Corp., 496 U.S. at 647–52; Davis v.
PBGC, 571 F.3d 1288, 1293 (D.C. Cir. 2009). Under this
framework, the court first considers “whether Congress has
directly spoken to the precise question at issue.” Chevron,
U.S.A., Inc. v. NRDC, Inc., 467 U.S. 837, 842 (1984). “If the
intent of Congress is clear, that is the end of the matter; for the
court, as well as the agency, must give effect to the
unambiguously expressed intent of Congress.” Id. at 842–43.
Otherwise, “if the statute is silent or ambiguous with respect to
the specific issue, the question for the court is whether the
9
agency’s answer is based on a permissible construction of the
statute.” Id. at 843.
At Chevron step one, “employing traditional tools of
statutory construction,” id. at 843, n.9, the court asks whether
Congress “has unambiguously foreclosed the agency’s
statutory interpretation,” Catawba Cty. v. EPA, 571 F.3d 20, 35
(D.C. Cir. 2009). We “begin with the language employed by
Congress.” Engine Mfrs. Ass’n v. S. Coast Air Quality Mgmt.
Dist., 541 U.S. 246, 252 (2004) (internal citation omitted). As
relevant, ERISA provides that the plan administrator must pay
benefits “only in the form of an annuity” “for the period
commencing on the date on which the plan administrator
provides a notice of distress termination.” 29 U.S.C.
§§ 1341(c)(3)(D)(i)–(ii). By contrast, it is silent with respect
to pre-NOIT lumpsum distributions. Invoking the expressio
unius canon, appellant principally contends that § 1341(c)’s
prohibition on post-NOIT lumpsum distributions reflects
Congress’ unambiguous intent to preclude PBGC from
denying pre-NOIT lumpsum distributions. See Appellant Br.
46–50; Appellant Reply Br. 16. In an administrative setting,
however, “the contrast between Congress’ mandate in one
context with its silence in another suggests not a prohibition
but simply a decision not to mandate any solution in the second
context, i.e., to leave the question to agency discretion.”
Cheney R. Co. v. ICC, 902 F.2d 66, 69 (D.C. Cir. 1990).
“Silence, in other words, may signal permission rather than
proscription.” Catawba Cty., 571 F.3d at 36. That § 1341(c)
addressed post-NOIT lumpsum distributions, therefore, does
not “suffice[] for the direct answer that Chevron step one
requires.” Id. (internal quotation marks and citation omitted).
Appellant further contends that by enacting § 1341(c) after
PBGC promulgated 29 C.F.R. § 4044.4(b), “Congress spoke
subsequently and more specifically to the timing of restrictions
10
on lump-sum payments with respect to distress termination
procedures.” Appellant Br. 52. Congress, however, is
“presumed to preserve, not abrogate, the background
understandings against which it legislates.” United States v.
Wilson, 290 F.3d 347, 356 (D.C. Cir. 2002). Appellant fails to
point to evidence suggesting that Congress intended for
§ 1341(c) to abrogate § 4044.4(b). In fact, nothing in ERISA’s
purpose, structure, or legislative history indicates that Congress
intended to limit PBGC’s authority to regulate pre-NOIT
lumpsum distributions. Absent evidence of clear
Congressional intent, § 4044.4(b) survives Chevron step one.
Proceeding to Chevron step two, the court asks whether 29
C.F.R. § 4044.4(b) is a “permissible construction” of ERISA.
Chevron, 467 U.S. at 843. Citing the district court’s analysis,
PBGC maintains that § 4044.4(b) promotes ERISA’s purpose
“by minimizing the possibility of abuse that could occur during
the time period when plan termination was anticipated but had
not yet occurred.” Appellee Br. 27 (citing Fisher, 468 F. Supp.
3d at 26); see also Allocation of Assets in Non-Multiemployer
Plans, 46 Fed. Reg. 9480, 9481 (Jan. 28, 1981). Appellant
offers no contrary arguments at Chevron step two, and the court
finds none. Thus, § 4044.4(b) easily satisfies our “highly
deferential” review at this step. Vill. of Barrington v. Surface
Transp. Bd., 636 F.3d 650, 667 (D.C. Cir. 2011).
B.
As to appellant’s contention that 29 C.F.R. § 4044.4(b) is
inapplicable to his lumpsum request, the court applies arbitrary
and capricious review. See United Steel, Paper & Forestry,
Rubber, Mfg., Energy, Allied Indus. & Serv. Workers Int’l
Union, AFL-CIO-CLC v. PBGC, 707 F.3d 319, 323–24 (D.C.
Cir. 2013). To survive this “fundamentally deferential”
review, “an agency action must be the product of reasoned
11
decisionmaking.” Fox v. Clinton, 684 F.3d 67, 74–75 (D.C.
Cir. 2012).
Appellant contends that in determining his lumpsum
request was made “in anticipation of plan termination,” the
PBGC’s 2016 decision misapplied three of the four factors
enumerated in § 4044.4(b). In his view, the first factor —
“[a]ny change in funding or operation procedures” — speaks
to changes in funding procedures, not funding status. See
Appellant Br. 55. That interpretation is not only grammatically
unnatural but also “illogical.” Fisher, 468 F. Supp. 3d at 28.
Indeed, appellant fails to fault PBGC’s more sensible
interpretation or explain why a plan’s deteriorating funding
status does not signal its impending termination. As to the
second factor — past practice — appellant points out that “the
Plan paid lump sum distributions to other plan participants both
before and after it denied [his] request.” Appellant Reply Br.
20. PBGC’s 2016 decision reasonably explained, however,
that appellant “was in a different situation from other Plan
participants” due to the “substantial benefit increase he
received under the Plan’s Second Amendment,” which applied
only to him. 2016 Remand Decision at 22. Finally, even if the
third factor — consistency with plan provisions — favored
appellant, PBGC’s 2016 decision correctly explained that “it is
unnecessary for all four of the listed circumstances to be
satisfied.” Id. After all, 29 C.F.R. § 4044.4(b) instructs PBGC
to “consider all facts and circumstances, including,” but not
limited to, the four enumerated factors. Here, the PBGC
Appeals Board marshaled ample uncontested facts supporting
its conclusion that the Plan’s termination was likely at the time
of appellant’s request. See 2016 Remand Decision at 18–20;
see also Fisher, 468 F. Supp. 3d at 27–28. On this record,
appellant fails to show that PBGC acted arbitrarily or
capriciously.
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In sum, the court concludes that 29 C.F.R. § 4044.4(b) is
valid and that the PBGC Appeals Board reasonably applied
§ 4044.4(b) to deny appellant’s lumpsum request.
Furthermore, because fiduciaries must act in accordance with
the terms of plan documents only “insofar as such documents
and instruments are consistent with the provisions of” ERISA,
29 U.S.C. § 1104(a)(1)(D), Penn Traffic fulfilled its fiduciary
duties by denying appellant’s request in compliance with
§ 4044.4(b). See Fisher, 468 F. Supp. 3d at 21, n.6; see also
2016 Remand Decision at 29. Therefore, the court need not
address appellant’s contentions that Penn Traffic’s handling of
his lumpsum request was inconsistent with the Plan’s terms.
See Appellant Br. 56–62. Accordingly, the court affirms the
grant of summary judgment to PBGC.