Thomas Davis v. PBGC ( 2013 )

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued September 10, 2013 Decided November 1, 2013
No. 12-5274
THOMAS G. DAVIS, ET AL.,
APPELLANTS
v.
PENSION BENEFIT GUARANTY CORPORATION,
APPELLEE
Appeal from the United States District Court
for the District of Columbia
(No. 1:08-cv-01064)
Anthony F. Shelley argued the cause for appellants. With
him on the briefs were Timothy P. O’Toole and Michael N.
Khalil.
James J. Armbruster, Assistant Chief Counsel, Pension
Benefit Guaranty Corporation, argued the cause for appellee.
With him on the briefs were Judith R. Starr, General Counsel,
Kenneth J. Cooper, Assistant General Counsel, Kimberly J.
Duplechain, Attorney, Israel Goldowitz, Chief Counsel, Charles
L. Finke, Deputy Chief Counsel, Paula J. Connelly and Garth D.
Wilson, Assistant Chief Counsel, and Joseph Krettek, Attorney.
Before: GARLAND, Chief Judge, ROGERS, Circuit Judge,
and WILLIAMS, Senior Circuit Judge.
2
Opinion for the Court by Circuit Judge ROGERS.
ROGERS, Circuit Judge: Appellants are approximately 1,700
retired U.S. Airways pilots and their beneficiaries (“the Pilots”).
They appeal the grant of summary judgment to the Pension
Benefit Guaranty Corporation (“PBGC”) on their claims
regarding pension benefits payable under the terminated
Retirement Income Plan for U.S. Airways Pilots (“the Plan”).
Of the Pilots’ twelve claims, three claims are not appealed and
four claims that are appealed but were not briefed are forfeited.
For the following reasons, upon de novo review, see Stephens v.
U.S. Airways Grp., Inc., 644 F.3d 437, 439 (D.C. Cir. 2011), we
affirm as to the five remaining claims.
I.
We begin with an overview of the statutory and regulatory
scheme and then summarize the factual background and
procedural history before turning, in Part II, to the merits of the
Pilots’ five claims.
A.
Congress enacted the Employee Retirement Income
Security Act of 1974 (“ERISA”) to establish “minimum
standards . . . assuring the equitable character of [employee
benefit] plans and their financial soundness.” Pub. L. No. 93-
406, § 2(a), 88 Stat. 829, 833 (codified at 29 U.S.C. § 1001(a)).
Title IV of ERISA created the PBGC, a “U.S. government
corporation within the Department of Labor that insures private-
sector defined-benefit pension plans.” Boivin v. U.S. Airways,
446 F.3d 148, 150 (D.C. Cir. 2006); 29 U.S.C. § 1302. This
“mandatory Government insurance program . . . protects the
pension benefits” of participants in or beneficiaries of qualified
plans. PBGC v. LTV Corp., 496 U.S. 633, 637 (1990) (“LTV
Corp.”). It does so by guaranteeing a class of “nonforfeitable
3
benefits,” 29 U.S.C. § 1322(a), reimbursing eligible participants
or beneficiaries when a guaranteed plan terminates without
sufficient funds.
If a qualified plan has insufficient assets to satisfy its
pension obligations the employer can terminate the plan
voluntarily or the PBGC can terminate it involuntarily. See LTV
Corp., 496 U.S. at 638; 29 U.S.C. §§ 1341(c), 1342(a). When
termination proceedings have begun, as occurred here, the
PBGC can request that the district court appoint it as trustee of
the plan. See Boivin, 446 F.3d at 150; 29 U.S.C. § 1342(b).
When a district court grants the request, the PBGC remains the
guarantor of the plan, see Boivin, 446 F.3d at 150, and therefore
has two roles: As guarantor, the PBGC is responsible for
covering the gap between the assets of the plan and the amount
guaranteed to the plan’s beneficiaries, see LTV Corp., 496 U.S.
at 637–38; 29 U.S.C. §§ 1301(a)(8), 1322(a). 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).
The administrator of a terminated plan distributes assets in
accordance with the six tier priority scheme set forth in 29
U.S.C. § 1344. The Pilots’ claims relate to priority category
three, which includes allocations
in the case of benefits payable as an annuity—
(A) in the case of the benefit of a participant or
beneficiary which was in pay status as of the beginning
of the 3-year period ending on the termination date of
the plan, to each such benefit, based on the provisions
of the plan (as in effect during the 5-year period ending
on such date) under which such benefit would be the
least,
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(B) in the case of a participant’s or beneficiary’s
benefit (other than a benefit described in subparagraph
(A)) which would have been in pay status as of the
beginning of such 3-year period if the participant had
retired prior to the beginning of the 3-year period and
if his benefits had commenced (in the normal form of
annuity under the plan) as of the beginning of such
period, to each such benefit based on the provisions of
the plan (as in effect during the 5-year period ending
on such date) under which such benefit would be the
least.
For purposes of subparagraph (A), the lowest benefit in
pay status during a 3-year period shall be considered
the benefit in pay status for such period.
29 U.S.C. § 1344(a)(3). These provisions exclude certain
benefits from priority category three based on whether (1) they
were in pay status (i.e., actually being paid) or could have been
in pay status (if an individual had retired) within three years of
the date of plan termination and (2) the provisions of the plan
creating them were “in effect” within the five-year period prior
to plan termination.
By regulation, 29 C.F.R. § 4044.13, the PBGC has
interpreted the limitations on inclusion in priority category three.
Section § 4044.13(a), “Definition,” provides that “[b]enefit
increases, as defined in [29 C.F.R.] § 4022.2, that were in effect
throughout the 5-year period ending on the termination date,
including automatic benefit increases during that period to the
extent provided in paragraph (b)(5) of this section, shall be
included in determining the priority category 3 benefit.” And
§ 4044.13(b)(5) provides that “automatic increases in the benefit
formula” provided for in “plan provisions” that were “adopted
and effective on or before the first day of the 5-year period
5
ending on the termination date” will be included in priority
category three if the increases were scheduled to occur during
the fourth and fifth years preceding termination. The PBGC
interprets “benefit increases” to include increases in benefits due
to cost-of-living adjustments (“COLAs”) arising out of increases
in the Internal Revenue Code’s § 415(b) dollar limits on annual
benefits, 26 U.S.C. § 415(b), which were incorporated into the
Plan. As such, the PBGC honored such increases if they
occurred in the fourth and fifth years prior to Plan termination
but not those occurring within the three years prior to
termination. The Pilots regard § 4044.13(b)(5) as irrelevant to
the status of the COLAs, which they claim are not benefit
increases but limitation adjustments. Instead they maintain that
the Plan provisions recognized such COLAs more than five
years before termination, and, under ERISA, the fact that the
provision was in place more than five years prior to Plan
termination is enough for the PBGC to honor all § 415(b)
increases during the entire five-year period before termination.
See infra Part II, Claim Two.
Section 4044.13(b), “Assigning benefits,” provides that “a
plan or amendment is ‘in effect’ on the later of the date on
which it is adopted or the date it becomes effective.” 29 C.F.R.
§ 4044.13(b)(6). As discussed in Part II, such a construction
implies that an amendment could be effective before it has been
adopted — e.g., when a benefit payment is made retroactive to
a date prior to the adoption of the amendment that created it.
The Pilots contend that the PBGC Appeals Board decision as to
the effective date of a Plan amendment conflicts with this
regulation. See infra Part II, Claim One.
The PBGC also has promulgated regulations regarding how
it handles benefit determinations. The PBGC makes initial
determinations “with respect to allocation of assets under section
4044 of ERISA [(29 U.S.C. § 1344)].” 29 C.F.R.
6
§ 4003.1(b)(4). They are issued in writing and must “state the
reason for the determination.” Id. § 4003.21. “Any person
aggrieved by an initial determination . . . may file an appeal,” id.
§ 4003.51, to be considered by the PBGC Appeals Board, which
is composed of three PBGC officials, id. § 4003.2. In a written
appeal, appellants can request to appear before the Board and
present witnesses to testify before the Board. Id. § 4003.54.
The Board has discretion to reject such requests. Id.
§ 4003.55(b). A decision issued by the Appeals Board
“constitutes the final agency action by the PBGC with respect to
the determination which was the subject of the appeal.” Id.
§ 4003.59(b).
B.
In 2002, U.S. Airways filed for bankruptcy and requested
that its pilots’ benefits plan be terminated pursuant to ERISA’s
“distress” termination procedures. See 29 U.S.C. § 1341(c).
The Plan terminated on March 31, 2003. The PBGC became
trustee and began making estimated payments to the retired
pilots pending its initial determinations on proper asset
allocation.
The Pilots first brought suit in November 2003, challenging
the PBGC’s calculation of estimated benefits. On appeal, this
court rejected the Pilots’ claims for failure to exhaust
administrative remedies. See Boivin, 446 F.3d at 158–59. Later
the PBGC issued initial determinations, and the Pilots appealed
to the PBGC Appeals Board, which issued the first of several
decisions on February 29, 2008. The Pilots challenged the
PBGC’s final determinations in the district court in June 2008
on the grounds that the PBGC has misapplied ERISA,
misinterpreted the Plan itself, and breached its fiduciary duties
to Plan participants and beneficiaries. The Pilots moved for a
preliminary injunction in August 2008. In September 2008, the
PBGC issued a decision related to some of the Pilots’ disability
7
claims. The district court denied the motion for a preliminary
injunction in December 2008, see Davis v. PBGC, 596 F. Supp.
2d 1, 5 (D.D.C. 2008), and this court affirmed, see Davis v.
PBGC, 571 F.3d 1288, 1295 (D.C. Cir. 2009). Thereafter the
district court granted summary judgment to the PBGC on all but
one claim. See Davis v. PBGC, 864 F. Supp. 2d 148, 172
(D.D.C. 2012); see also Davis v. PBGC, 815 F. Supp. 2d 283
(D.D.C. 2011).
II.
The Pilots now appeal nine of the claims stated in their
second amended complaint. They have, however, only provided
argument in support of five claims. In this circuit, “[i]t is not
enough merely to mention a possible argument in the most
skeletal way, leaving the court to do counsel’s work, create the
ossature for the argument, and put flesh on its bones.’” Consol.
Edison Co. of N.Y., Inc. v. FERC, 510 F.3d 333, 340 (D.C. Cir.
2007) (quoting Schneider v. Kissinger, 412 F.3d 190, 200 n.1
(D.C. Cir. 2005)). As more recently explained, “by failing to
include any relevant arguments in their appellate briefs, . . .
appellants fail to show that the district court’s determination”
was erroneous. Gerlich v. U.S. Dep’t of Justice, 711 F.3d 161,
173 (D.C. Cir. 2013). The Pilots may not attempt to do so by
incorporating argument presented in the district court, see
Appellants’ Br. 56 n.12, as this would circumvent the court’s
rules, see D.C. CIR. R. 32(a), regarding the length of briefs,
where they fail, as here, to persuade the court that they could not
have presented their challenge within the word limits for their
briefs. See Gerlich, 711 F.3d at 173. According to the docket,
the Pilots never sought an extension of the length of their
opening brief. We have no basis not to presume that the Pilots’
counsel have briefed the claims determined to be most important
and with the greatest chance of success on appeal.
8
Turning to the Pilots’ five claims, the court need not resolve
the parties’ contentions regarding whether the PBGC is entitled
to deference pursuant to Chevron, U.S.A., Inc. v. NRDC, 467
U.S. 837 (1984), when it acts as the trustee in an involuntary
retirement plan termination. Regardless of the standard of
deference, the Pilots’ claims relating to the PBGC’s
interpretation of the statute and regulations must fail. Similarly,
the court need not decide the level of deference due to the
PBGC’s interpretation of Plan provisions because the Pilots
have not demonstrated Article III standing for part of one claim
and their other claims fail regardless of the standard. For these
reasons we also need not decide whether the decision in Davis
v. PBGC, 571 F.3d 1288, regarding the Pilots’ request for a
preliminary injunction, is the law of the case on the standard of
review, see Sherley v. Sebelius, 689 F.3d 776, 783 (D.C. Cir.
2012).
Claim One concerns whether the benefit increase under
U.S. Airways’ Early Retirement Incentive Program (“ERIP”)
should be placed in priority category three. This designation is
significant because the PBGC has determined that the Plan’s
assets cover all Plan benefits through priority category three.
The ERIP was adopted on December 4, 1997, had an “effective
date” of January 1, 1998, and allowed pilots on a seniority list
who would turn forty-five on or before May 1, 2000 to elect to
receive the benefit between March 1, 1998 and April 30, 1998.
Those who elected to receive the benefit could not receive it
before May 1, 1998, less than five years prior to the Plan’s date
of termination.
The Board determined that because the earliest date the
benefit could be paid was one month after the beginning of the
five-year period preceding the date of Plan termination, the
ERIP benefit could not be included in priority category three.
This is because during that one month period, those pilots who
9
had elected the benefit received a lesser benefit, and 29 C.F.R.
§ 4044.13(b)(3)(i) provides that benefits in priority category
three are limited to “the lesser of the lowest annuity benefit in
pay status during the 3-year period ending on the termination
date and the lowest annuity benefit payable under the plan
provisions at any time during the 5-year period ending on the
termination date.” According to the Board, the lesser amount
was the amount payable during the first month of the five-year
period preceding termination. So understood, it would be
improper to place the ERIP benefits in priority category three.
The Pilots contend that the regulation on which the Board
relied, 29 C.F.R. § 4044.13(b)(3)(i), imposes a cap “on the
overall amount of [priority category three] benefits” and is not
relevant. Appellants’ Br. 36. Instead, they maintain that the
relevant regulation is § 4044.13(b)(2), which refers to an
effective date while § 4044.13(b)(3)(i) refers to a date when the
benefit was payable. According to the Pilots, the effective date
was January 1, 1998, before the five-year period prior to the
Plan termination date. Under this interpretation, the court
should conclude the ERIP benefit is in priority category three
because there would be no lesser benefit under the Plan
provisions in effect during the first month of the five-year period
preceding termination; the ERIP benefit would have been in
place throughout that period.
The PBGC concluded that the relevant regulation
interpreting the phrase “in effect” in 29 U.S.C. § 1344(a)(3)(A)
is 29 C.F.R. § 4044.13(b)(3)(i). This choice is the better
interpretation of the regulatory scheme and there is no question
that the court defers to the regulation’s interpretation of the
statute because the regulation was issued in the PBCG’s role as
an agency (and not as a fiduciary), see PBGC v. LTV Corp., 496
U.S. 638, 648 (1990). The statutory phrase “in effect” in
§ 1344(a)(3)(A) is ambiguous, and the PBGC has interpreted it
10
in 29 C.F.R. § 4044.13(b)(3)(i) to mean “payable.” The Pilots
erroneously suggest such an interpretation erases the distinction
in 29 U.S.C. § 1344(a)(3)(A) between the benefits “in pay
status” and those “provisions . . . in effect.” Section
§ 4044.13(b)(3)(i) retains the distinction by referring to benefits
that were in “pay status” and those that were “payable.” As the
PBGC explains, there is no inconsistency between the
regulations in § 4044.13(b)(3)(i), interpreting “in effect” in 29
U.S.C. § 1344(a)(3)(A) to mean “payable,” and § 4044.13(b)(6),
which interprets “in effect” in 29 U.S.C. § 1344(a)(3)(A) as “the
later of the date on which [a plan or amendment] is adopted or
the date it becomes effective”: a plan amendment could have,
for example, an adoption date of March 25, 1998, a date when
payments begin to be made of May 1, 1998, and an effective
date of January 1, 1998 (i.e., a retroactive payment date). Under
this scenario, the benefit would be “payable” as of the effective
date (January 1, 1998) but would not be “paid” until May 1,
1998. The “in effect” date would therefore be March 25, 1998,
the later of the January 1, 1998 effective date and the March 25,
1998 adoption date.
Claim Two relates to § 7 of the Plan, which caps maximum
yearly retirement income by incorporating the annual benefit
limit in the Internal Revenue Code, 26 U.S.C. § 415(b). This
provision was adopted well before the five-year period prior to
Plan termination. Subsection (d) of § 415, however, allows for
COLAs to increase the limits set in § 415(b). The Appeals
Board determined that only COLAs that came into effect during
the fourth and fifth years prior to Plan termination should be
included in priority category three. The Board reasoned that
incorporation of the § 415(b) limits into the Plan effectively
made those limits provisions of the Plan. A default rule —
priority category three includes the “lesser of the lowest annuity
benefit in pay status during the 3-year period ending on the
termination date and the lowest annuity benefit payable under
11
the plan provisions at any time during the 5-year period ending
on the termination date,” 29 C.F.R. § 4044.13(b)(3)(i) —
includes an exception for automatic benefit increases “effective
on or before the first day of the 5-year period ending on the
termination date,” id. § 4044.13(b)(5). If plan provisions
providing for such “automatic increases in the benefit formula
for both active participants and those in pay status or for
participants in pay status only” are adopted and effective before
the five-year period, then “automatic increases scheduled during
the fourth and fifth years preceding termination” are also
included in priority category three. Id. § 4044.13(b)(5). The
Board included scheduled COLA increases during the fourth and
fifth years prior to Plan termination in priority category three,
but not those during the following three years.
The Pilots contend that the Appeals Board’s conclusion
conflicts with 29 U.S.C. § 1344(a)(3), which, they maintain,
refers “to the ‘provisions’ ‘in effect’ during the five-year pre-
termination period . . . not [to] whether a particular ‘benefit
increase’ was payable five years before plan termination.”
Appellants’ Br. 38. Because § 7 of the Plan incorporated the
§ 415(b) limits and the § 415(d) COLAs before the five-year
period, the Pilots maintain, the “provision” was “in effect” prior
to the five-year period, and the increases that become effective
within the five-year period as a result of that provision should all
be included in priority category three. They further maintain
that the automatic benefit increase regulation, 29 C.F.R.
§ 4044.13(b)(5), cannot “save the PBGC’s position,” because
the COLAs are not benefit increase provisions but increases in
a benefit limitation. Appellants’ Br. 38.
The PBGC’s analysis tracks the statute. As it explains, the
incorporation of the COLAs in § 7.2 of the Plan makes them
benefit increases. The “lowest annuity” rule, 29 U.S.C.
§ 1344(a)(3); 29 C.F.R. § 4044.13(b)(3)(i), favors the PBGC’s
12
view because the COLAs were not payable throughout the five-
year period prior to Plan termination. Under PBGC regulations,
29 C.F.R. § 4044.13(b)(3)(i), priority category three includes the
“lesser of the lowest annuity benefit in pay status during the 3-
year period ending on the termination date and the lowest
annuity benefit payable under the plan provisions at any time
during the 5-year period ending on the termination date.”
Because the COLAs were not “payable” until after the five-year
period began, a lesser annuity benefit was payable during that
time period, and it is that lesser benefit that should be included
in priority category three. The Board’s is the better
interpretation of the statute.
Claim Seven involves the calculation of benefits for pilots
who could have retired three years before Plan termination but
did not. See 29 U.S.C. § 1344(a)(3)(B). The Pilots maintain
that their benefits should not have been fixed as of the date they
could have taken retirement but instead should be increased
under principles of “actuarial equivalence” to compensate for
the value they lost by not having their benefits commence
earlier. The Appeals Board concluded that the statute and the
relevant regulations do not allow for an adjustment but fix the
benefit no later than the beginning of the three-year period
before termination.
The Pilots rely primarily on a reference to “actuarial
equivalen[ce]” elsewhere in ERISA, 29 U.S.C. § 1054(c)(3),
which provides:
For purposes of this section, in the case of any defined
benefit plan, if an employee’s accrued benefit is to be
determined as an amount other than an annual benefit
commencing at normal retirement age, or if the accrued
benefit derived from contributions made by an
employee is to be determined with respect to a benefit
13
other than an annual benefit in the form of a single life
annuity . . . commencing at normal retirement age, the
employee’s accrued benefit . . . shall be the actuarial
equivalent of such benefit or amount determined under
paragraph (1) or (2).
According to the Pilots, this means that the actuarial equivalent
of the accrued benefit is nonforfeitable and belongs in priority
category three. As support, however, they point to two
inapposite cases, Contilli v. Local 705 International
Brotherhood of Teamsters Pension Fund, 559 F.3d 720 (7th Cir.
2009), and Stephens v. U.S. Airways Group, Inc., 644 F.3d 437
(D.C. Cir. 2011). Neither case addresses distress terminations,
priority category three, or Title IV of ERISA. Contilli, 559 F.3d
at 722, dealt with an employee whose retirement payments,
which began several months after he retired, were not increased
so that his pension would have the same value as if payments
had begun at his retirement. Stephens, 644 F.3d at 438, dealt
with a similar issue; plaintiffs opted to receive their pension
benefits in a lump sum, but wanted interest on the sum in view
of the forty-five-day delays from the dates they would have
received the first annuity payments and the dates the plan
disbursed their lump sum payments.
The Pilots fail to show that the PBGC has not adopted the
better interpretation of 29 U.S.C. § 1344 (a)(3)(B), quoted
supra. First, the ERISA provisions on which they rely are not
relevant to priority category three determinations. The reference
to actuarial equivalence in 29 U.S.C. § 1054(c)(3) relates more
generally to benefit accrual requirements rather than which
benefits fit into priority category three after a distress
termination, and § 1054(c)(3) limits the actuarial equivalence
requirement to the “purposes of this section.” Second, the overt
reference to an actuarial equivalence calculation in 29 U.S.C.
§ 1054(c)(3) undermines the Pilots’ position because it
14
demonstrates that when Congress intended such a requirement
it was explicit and it was not in the context of priority category
three. Congress included references to actuarial equivalence
elsewhere in ERISA, see, e.g., 29 U.S.C. § 1054(c)(3). In
contrast, § 1344(a)(3)(B) provides that the relevant benefit is
that which “would have been in pay status” at the beginning of
the three-year period preceding termination if the participant’s
benefits had commenced at that time. There is no mention of
adjusting that benefit under principles of actuarial equivalence.
“Where Congress includes particular language in one section of
a statute but omits it in another section of the same Act, it is
generally presumed that Congress acts intentionally and
purposely in the disparate inclusion or exclusion.” Russello v.
United States, 464 U.S. 16, 23 (1983) (internal quotation
omitted). Finally, the PBGC regulations cited by the Appeals
Board that interpret § 1344(a)(3)(B) are consistent with this
instruction. Neither § 4044.13(b)(2)(ii) nor § 4044.13(b)(3)(ii)
of PBGC’s regulations provides for actuarial equivalence.
Rather the phrase “as if the benefit had commenced at that time”
in 29 C.F.R. § 4044.13(b)(2)(ii) (emphasis added) fixes the
benefit at the beginning of the three-year period preceding plan
termination — i.e., actuarial equivalence adjustments are not
permitted.
Claim Eight involves a dispute over § 4.1(E) of the Plan,
which the Pilots refer to as the “minimum benefit provision.”
This provision sets a minimum retirement income for pilots who
were on a seniority list under the pre-December 1, 1972 plan
(the “Prior Plan”) based on benefits they would have received
had that plan continued in effect without change. The Pilots
contend that the plain meaning of § 4.1(E) confirms that all Prior
Plan benefits should be included in the minimum benefit
calculation, while the PBGC determined that some should and
others should not.
15
First, the Pilots’ objection that the district court erred in not
considering additional documents is of no moment inasmuch as
the court’s review is de novo and the decisions under review are
those of the PBGC Appeals Board. The Pilots fail to show that
the Board abused its discretion in refusing to consider evidence
that was not submitted to it. The evidence relates to a lawsuit,
Everett v. USAir Group, Inc., 927 F. Supp. 478 (D.D.C. 1996),
aff’d sub nom. Everett v. U.S. Airways Group, Inc., 194 F.3d 173
(D.C. Cir. 1999), regarding the minimum benefit provision. In
the consolidated appeal before the PBGC Appeals Board, the
Pilots submitted some documents from the Everett litigation and
implicitly offered to submit more at an evidentiary hearing, but
the Board declined to hold a hearing. The Pilots blame the
Board for not accepting the additional evidence they offered to
submit at a hearing if the Board was inclined to rule against
them. The Pilots also introduced in the district court a
declaration from Seth Schofield, a former U.S. Airways CEO
and witness to the 1972 Plan negotiations. The Pilots claim that
they obtained the Schofield declaration only after the Board
issued its decision, in response to the Board’s reference to an
absence of documentation from U.S. Airways employees who
negotiated the minimum benefit provision.
The Pilots’ first point barely merits consideration. If the
Pilots wanted the Board to consider the additional documents
they should have submitted them. The documents in the Everett
case and their relevance were known to the Pilots. The Pilots
were represented by counsel throughout the Board proceedings.
As to the timing of the Schofield declaration, the Pilots rely on
Esch v. Yeutter, 876 F.2d 976, 991 (D.C. Cir. 1989), which
allows parties to supplement the administrative record “where
evidence arising after the agency action shows whether the
decision was correct or not.” But, as the district court noted, see
Davis, 815 F. Supp. 2d at 291, the Schofield declaration did not
arise after the Board’s decision. The Pilots informed the Board
16
that they had declarations from all the U.S. Airways negotiators
who recalled the bargaining over the minimum benefit
provision. Even if they did not have a version of the Schofield
declaration at the time of the appeal, they knew that declarations
of this type would be relevant and they offer no reason why they
could not have obtained the Schofield declaration in time to
submit it with their appeal to the Board. Hence, it is properly
disregarded by this court. As the district court observed in
denying the Pilots’ request that it consider documents that were
not part of the administrative record before the Appeals Board:
[F]or whatever reason, [the Pilots] did not provide all
of the evidence supporting their position with their
appeal. The Board . . . chose to act on the evidence
before it and not to hold a hearing. The Board did not
contravene any regulations by doing so. [The Pilots]
may have been legitimately surprised by the Board’s
course of action, but [the Pilots’] own choice to
withhold evidence at the agency level — whether
tactical, labor-saving, or otherwise — does not provide
a basis to allow the introduction of extra-record
evidence during judicial review.
Davis v. PBGC, 815 F. Supp. 2d at 292. The Pilots criticize the
Board for concluding that the additional evidence “could not
possibly make a difference,” Reply Br. 20 (emphasis in
original), but the Board’s conclusion was more nuanced,
explaining that the statements in the affidavit provided to it, and
any similar statements in additional affidavits, were insufficient
to establish the Pilots’ claims because they conflicted with the
provisions of the Plan.
The Pilots’ attempt to rely on the administrative record in
the Jerome Peterman case is unavailing. They appear to attempt
to make an end run around the district court’s September 30,
17
2011, ruling declining to supplement the record, Davis, 815 F.
Supp. 2d at 292. In any event, Peterman was listed as one of the
plaintiffs although the Board did not resolve his appeal until
May 9, 2012, twenty-one days before the district court granted
summary judgment to the PBGC and more than six months after
the district court declined to supplement the record. It is unclear
whether Peterman was ever properly a plaintiff given that the
Board decision in his case was never under review.
In addressing the Pilots’ four Claim Eight arguments, we
therefore look to the Plan and confine our review to the evidence
in the administrative record. The Pilots offer the barest of
arguments based on the text of the Plan, arguing only that “as a
matter of common sense and sound linguistic construction, a
Plan provision that promises a benefit ‘no less’ than the benefit
provided by the Prior Plan necessarily includes everything that
was included in the Prior Plan and does not need to specifically
delineate each component.” Appellants’ Br. 51. The PBGC
maintains that other language in the Plan reveals that the Plan
was not to continue exactly as before.
Reinvested dividends. The Prior Plan included a variable
component based on the performance of a group of stocks held
by the Prior Plan. The valuation of these stocks included
dividends. The new Plan, which did not include this variable
component, provided that for purposes of “determining the
retirement income to which the Participant would have been
entitled” under the Prior Plan, the calculation should assume that
if the variable component had survived, its performance would
have been “equal to the investment performance of the Standard
and Poor’s 500 stock index (unadjusted for dividends).” The
Pilots’ position would require the court to ignore this phrase and
include dividends in the minimum benefit calculation. To
ignore the plain text would clearly be improper, particularly
18
because it appears in the same sentence that preserves the
minimum benefits of the pre-1972 plan.
Twice-yearly adjustments. The Pilots maintain that Prior
Plan pilots are entitled to twice-yearly adjustments incorporated
in the pre-1972 plan to reflect changes in the value of the
variable component of that plan. The PBGC determined that the
new Plan fixed the minimum benefit amount at a Prior Plan
pilot’s benefit commencement date or termination of
employment. The minimum benefit provision of the new Plan
does not mention twice-yearly adjustments, but instead states
that a Prior Plan pilot’s retirement income “shall not be less than
the amount to which he would have been entitled at his Benefit
Commencement date or Termination of Employment had the
Plan continued in effect.” Although “amount to which he would
have been entitled” could mean the amount at the time of
retirement plus future adjustments, the Plan’s text indicates a
fixed amount was intended, stating that the relevant figure is the
amount to which one was entitled at a particular moment in
time. This limitation appears in the same sentence as text
preserving the Prior Plan pilots’ minimum benefits and is a
qualification of that statement.
1% termination credit. The Pilots maintain that they are
entitled to an “upward adjustment to account for forfeitures to
the Plan caused by the termination of service of unvested
participants.” Second Am. Cmplt. at 185, Davis v. PBGC, 864
F. Supp. 2d 148 (D.D.C. 2012) (No. 1:08-cv-1064). The
Appeals Board found this “1% termination credit,” as the Pilots
call it, nowhere appeared in the new Plan, was never applied by
the airlines after the new Plan took effect, and, most
significantly, was not necessary because the new Plan
eliminated the possibility of the type of forfeiture that had given
rise to the need for the credit. The Pilots do not contest the
finding that the airlines had never applied this credit, and
19
accordingly the PBGC does not run afoul of Section 4.1(E)’s
requirement that Plan benefits for qualified Pilots “not be less
than the amount to which [they] would have been entitled . . .
had the [Prior] Plan continued in effect without change.”
Indeed, under the new Plan, there is no need to allocate forfeited
benefits and therefore no need to award the Prior Plan’s 1%
termination credit.
50% income supplement for totally and permanently
disabled pilots. Here, the Pilots maintain that the PBGC has
failed to provide those qualified participants in the pre-1972
plan who became “‘totally and permanently’ disabled” with the
Prior Plan’s “50% retirement income supplement.” The Appeals
Board found that the new Plan explicitly set forth two formulae
for assessing benefits for individuals who were totally and
permanently disabled – one for those who began receiving
disability benefits on or after December 1, 1974 and one for
those who began receiving disability benefits prior to December
1, 1974.
The court does not address this part of Claim Eight because
the Pilots have failed to demonstrate Article III standing by
showing at least one of them was on the relevant seniority list as
of December 1, 1972, and had become totally and permanently
disabled within two years after retiring due to a related
disability. See Plan § 4.1(E); Prior Plan § 4. In a supplemental
brief the Pilots stated that “[a]t least four such Appellants” were
“entitled to the 50% disability retirement supplement,” and
identified the four by name, but failed to identify the relevant
criteria, both eliding the difference between “normal” and
“disability” retirement and failing to state that the total and
permanent disability must be related to the earlier disability. See
Appellants’ Supp. Br. 3 (Sept. 19, 2013); see id. 2. Given the
misstatement of the criteria, the Pilots’ identification of “four
such [Pilots]” fails to show any Pilot suffered an injury in fact
20
as a result of the PBGC’s determination on the 50% supplement.
See Lujan v. Defenders of Wildlife, 504 U.S. 555, 560–61
(1992). The exhibit to which the Pilots point on the question of
whether the Pilots’ disabilities entitled them to the 50%
supplement at issue is unhelpful because it lists only the names
of “Disability Pilots” without indicating whether these Pilots’
disabilities meet the Prior Plan’s criteria. See Appellants’ Supp.
Br. 3 (citing Ex. 3 to Decl. of Ronald B. Natalie). In any event,
the PBGC responded that the four identified Pilots could not
benefit from a favorable ruling on this part of Claim Eight
because their current benefits are equal to the Internal Revenue
Code § 415(b) cap at issue in Claim Two. See Appellee’s
Response to Appellants’ Supp. Br. 2-4. The Pilots
acknowledged in their supplemental brief that avoidance of the
§ 415(b) cap depended on their prevailing on Claim Two, see
Appellants’ Supp. Br. 3, which they do not.
Claim Eleven involves the Board’s September 11, 2008
decision concerning eligibility for and calculation of the Pilots’
disability retirement benefits. The Plan’s disability retirement
provision in § 4.1(E) guarantees a minimum amount of basic
retirement income to a pilot “who begins receiving disability
benefits under the Additional Benefit Programs on or after
December 1, 1974, and who is determined to be totally and
permanently disabled” (emphasis added). The “Additional
Benefit Programs” include the separately administered USAir,
Inc. Pilot Disability Plan (the “Disability Plan”).
The Pilots’ position here rests upon their views of the
procedures that must be in place to determine who is totally and
permanently disabled, and the participants or beneficiaries who
are covered by the disability provision in § 4.1(E). On
procedures, the Pilots describe (without providing a record
citation) a 1980 amendment to “the Plan” that fundamentally
changed the way disability determinations were made.
21
According to the Pilots, these changes meant that pilots were no
longer required to secure a formal Social Security
Administration (“SSA”) determination of total and permanent
disability but instead could seek an initial determination of total
and permanent disability from U.S. Airways and, if
unsuccessful, a new determination from either a medical
examiner or the U.S. Airways Retirement Board. Consequently,
the Pilots conclude that the PBGC must provide a similar
alternative mechanism for obtaining a determination of total and
permanent disability.
The PBGC points out that the changes to which the Pilots
refer are part of the Disability Plan, rather than the Retirement
Income Plan. The Disability Plan, not the Retirement Plan,
governs total and permanent disability determinations and it is
ongoing and administered by U.S. Airways. See Appellee’s Br.
56-57. The PBGC states that it is continuing U.S. Airways’
long-established practice of deferring to the plan administrator
of the Disability Plan for disability determinations. See id. 56.
More significantly for our purposes, the PBGC states that the
Pilots can demonstrate no legal basis for imposing obligations
on the PBGC based on provisions of the Disability Plan because
it administers only the Retirement Plan. In fact the Pilots fail to
cite a legal basis on which the court could conclude that the
PBGC was required to continue the pre-termination practice as
part of its responsibilities in administering the Retirement Plan.
Their assertion that “there is absolutely no evidence that the
Disability Plan is resolving or would resolve disputes involving
pre-termination disabilities,” Reply Br. 25, lacks support in the
record and in rebuttal oral argument they never challenged the
statement by PBGC’s counsel that before the Plan terminated,
all disability determinations were made under the separate
Disability Plan, which still exists today, see Oral Arg. at 53:02
(Sept. 10, 2013). By contrast, the PBGC’s argument, including
that the Pilots could have gone back to the Disability Plan to get
22
a determination, was met by the Pilots’ rebuttal acknowledging
that the Disability Plan still exists, but asserting that under prior
practice it was a gatekeeper and after going to the Disability
Plan pilots could go to the Retirement Board (which no longer
exists) or to a medical examiner (which the PBGC does not
allow). Therefore, they argued, their only option is an SSA
determination. Still, this response does not explain why it
should be up to the PBGC, rather than the Disability Plan
administrator, to permit a medical examiner to find total and
permanent disability, or why it is inappropriate for the PBGC to
defer to the Disability Plan administrator on this question
concerning interpretation of the Disability Plan.
With regard to the identification of which pilots are eligible
for the basic retirement income guarantee, § 4.1(E) provides that
it is available “to a Participant who begins receiving disability
benefits under the Additional Benefit Programs on or after
December 1, 1974, and who is determined to be totally and
permanently disabled” (emphasis added). The PBGC reads this
provision as a two part test: to qualify, the pilot must be
determined to be totally and permanently disabled and at the
time of retirement have received disability benefits under the
Additional Benefit Programs. The Pilots disagree, maintaining
the date makes the clause a timing requirement, indicating that
the formulae directly following in the Plan apply to those who
are totally and permanently disabled after December 1, 1974,
not those who were totally and permanently disabled before that
date. The Pilots provided no record citation to show that the
PBGC’s reading was inconsistent with other provisions of the
Plan or with the history of the provision and so failed to show
that the PBGC erred in relying on the Plan’s plain text. The
Pilots suggest that a requirement that a totally and permanently
disabled pilot receive disability benefits before retiring is
inconsistent with the text defining the retirement benefit as what
the participant was “entitled to receive under the Additional
23
Benefits Programs,” not what he was actually receiving. This
phrase relates, however, to benefit calculation, rather than the
antecedent eligibility question. In addition, the Pilots offer no
interpretation of the word “and” in the provision that identifies
which participants are eligible.
Accordingly, we affirm the judgment of the district court
granting summary judgment to the PBGC on the five claims
before this court.