United Steel, Paper & Forestry, Rubber, Manufacturing, Energy, Allied Industrial & Service Workers International Union Ex Rel. Thunderbird Mining Co. Pension Plan v. Pension Benefit Guaranty Corp. , 707 F.3d 319 ( 2013 )

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued November 5, 2012 Decided January 11, 2013
No. 12-5116
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.,
APPELLANTS
v.
PENSION BENEFIT GUARANTY CORPORATION,
APPELLEE
Appeal from the United States District Court
for the District of Columbia
(No. 1:09-cv-00517)
Andrew D. Roth argued the cause for appellant. With him
on the briefs were Laurence Gold and David R. Jury. Jeremiah
A. Collins entered an appearance.
Kenneth J. Cooper, Assistant General Counsel, Pension
Benefit Guaranty Corporation, argued the cause for appellee.
With him on the brief were Judith R. Starr, General Counsel,
Kimberly J. Duplechain, Attorney, Israel Goldowitz, Chief
Counsel, Karen L. Morris, Deputy Chief Counsel, Kartar S.
Khalsa, Assistant Chief Counsel, and Nathaniel Rayle, Attorney.
2
Before: GARLAND and KAVANAUGH, Circuit Judges, and
RANDOLPH, Senior Circuit Judge.
Opinion for the Court filed by Senior Circuit Judge
RANDOLPH.
RANDOLPH, Senior Circuit Judge: This is an appeal from
the district court’s judgment affirming a decision of the Pension
Benefit Guaranty Corporation, the government agency that
administers pension termination insurance under Title IV of the
Employee Retirement Income Security Act of 1974, as
amended, 29 U.S.C. §§ 1001–1461, commonly known as
ERISA. In this case, participants in the Thunderbird Mining
Company Pension Plan sought “shutdown” pension benefits.
These early retirement benefits are triggered by a “permanent
shutdown of a plant, department or subdivision thereof” and are
payable to plan participants who meet certain age and years-of-
service requirements.1 The agency denied the participants’
requests.
Eveleth Mines, LLC, doing business as EVTAC Mining,
and its wholly owned subsidiary, Thunderbird Mining Company
(we refer to the two companies collectively as “Eveleth”),
1
Under the terms of Thunderbird’s pension plan, “70/80
Retirement” benefits are payable upon a permanent shutdown to a
participant “who has not attained the age of 62 years and who shall
have had at least 15 years of continuous service and (i) shall have
attained the age of 55 years and whose combined age and years of
continuous service shall equal 70 or more, or (ii) whose combined age
and years of continuous service shall equal 80 or more.” “Rule-of-65
Retirement” benefits are payable upon a permanent shutdown to a
participant “(i) who shall have had at least 20 years of continuous
service as of his last day worked, (ii) who has not attained the age of
55 years, and (iii) whose combined age and years of continuous
service shall equal 65 or more but less than 80.”
3
produced taconite pellets in a plant in Minnesota. Taconite
pellets are used in the production of iron and steel. In early
2003, Eveleth suffered a drastic reduction in orders when two of
its primary customers (joint owners of an approximately 85
percent interest in Eveleth) decided to begin purchasing taconite
pellets from other sources.
On February 14, 2003, Eveleth sent a confidential letter to
the local district director of the United Steel, Paper and Forestry,
Rubber, Manufacturing, Energy, Allied Industrial and Service
Workers International Union, AFL-CIO-CLC, the union
representing Eveleth’s approximately four hundred hourly
employees. Citing a “lack of customer orders,” the letter advised
the union of the company’s intention to “close permanently” the
mining operation “on or about May 14, 2003.” The company
noted that it was prepared to discuss its proposed course of
action and invited the union to “suggest alternative courses.”
Unable to secure new orders, Eveleth filed for bankruptcy
under Chapter 11 of the Bankruptcy Code,2 and on May 15,
2003, ceased production and laid off all but four of its hourly
employees. According to a March 10, 2003, notice that Eveleth
issued to its employees,3 the closure was expected to be
temporary, “but only if anticipated pellet orders are received
during the shutdown period.”
2
Eveleth Mines filed for bankruptcy on May 1, 2003, and
Thunderbird Mining filed for bankruptcy two weeks later, on May 15,
2003. The two cases were jointly administered.
3
The notice was issued under the Worker Adjustment and
Retraining Notification Act, which requires employers, under certain
circumstances, to give employees at least sixty days’ notice of a plant
closing or mass layoff. See 29 U.S.C. § 2102(a).
4
In connection with the shutdown, management instructed
the four remaining hourly employees (and twenty-nine salaried
employees) to secure the plant site by, among other things,
welding shut the doors and gates, repairing damaged equipment
and plumbing, shutting off the electricity, and disconnecting the
batteries in equipment and vehicles. The plant had been
temporarily shut down in the past, and similar work had been
performed. But unlike during prior shutdowns, during this
shutdown the plant was not maintained in “standby condition.”
On June 15, 2003, after this work was completed, Eveleth laid
off the four remaining hourly employees, but retained a staff of
salaried employees to handle administrative tasks and prevent
fire and flooding. In a subsequent filing with the bankruptcy
court (in October), the company stated that it “continue[d] to
maintain the equipment and other assets associated with its
mining operations to protect the enterprise value of its estate”
while it sought a purchaser or funding for a plan of
reorganization.
On July 5, 2003, Eveleth’s president and the local union
president met with Jim Oberstar, then a congressman from
Minnesota, and discussed Eveleth’s failure to secure new sales
contracts. The congressman, who knew the Chinese ambassador
to the United States, recommended that Eveleth negotiate with
Laiwu, a Chinese corporation, to either secure new sales
contracts or sell the company’s assets. About three months later,
in early October, Laiwu and an Ohio mining company offered
to purchase Eveleth’s assets, with the intention of operating the
plant and producing taconite pellets. The proposed sale terms
required Eveleth “to restore its mining operations to operating
condition consistent with industry practice” in advance of the
proposed closing on December 1, 2003. The bankruptcy court
approved the sale on November 25, 2003, and the transaction
closed on December 1, 2003. On that date, Eveleth permanently
laid off all of its employees except three members of
5
management. During the month of December, the purchasers
hired substantially all of the company’s former hourly
employees under the terms of a new collective bargaining
agreement.
Meanwhile, after receiving notice of Eveleth’s bankruptcy
filing in May, the Pension Benefit Guaranty Corporation began
analyzing the company’s prospects and its ability to sustain its
pension plan. The pension-guaranty agency insures participants
in defined-benefit pension plans, such as the plan participants in
this action, against the loss of certain benefits when the plan
lacks sufficient assets to pay promised benefits in full. Subject
to certain limitations, when an underfunded pension plan is
terminated, the agency guarantees the payment of
“nonforfeitable” benefits (i.e., those benefits for which a
participant has satisfied the conditions for entitlement under the
terms of the plan, as of the date of termination, see 29 U.S.C.
§ 1301(a)(8)). See id. § 1322; see also PBGC v. LTV Corp., 496
U.S. 633, 636–38 (1990). (This insurance is funded, in part,
from premiums paid by employers who sponsor covered pension
plans, see 29 U.S.C. §§ 1306, 1307, and recoveries from
employers whose underfunded plans have terminated, see id.
§ 1362.) If the agency determines that a pension plan will be
unable to pay benefits when due or that the agency’s loss with
respect to the plan will increase unreasonably if the plan is not
terminated, the agency may initiate proceedings to terminate the
plan. See 29 U.S.C. § 1342(a)(2), (4).
Having determined that Eveleth’s pension plan had a
“funded ratio” of only 52 percent and that Eveleth had “no
realistic prospect of adequately funding it,” the agency
concluded that the plan would be unable to pay benefits when
due. The agency also concluded that its long-run loss with
respect to the plan would increase unreasonably if the plan was
not soon terminated. This was largely because, after Eveleth’s
6
bankruptcy filing and the cessation of production in May 2003,
laid-off employees had submitted applications for shutdown
pension benefits, asserting that their employer had permanently
ceased operations. While Eveleth, in its role as plan
administrator, took the position that the shutdown was only
temporary and thus denied such benefits, the agency believed
there was a strong possibility that the shutdown would soon
become permanent. The agency determined that upon such a
permanent shutdown, the plan would owe an additional $70
million in benefits, of which about $35 million would be
guaranteed by the agency. In addition, as of August 1, 2003, the
“phase in” of an earlier benefit increase was estimated to
increase guaranteed, but unfunded, benefits by approximately
$1.6 million.
Accordingly, on July 24, 2003, the agency filed an action in
federal district court, pursuant to 29 U.S.C. § 1342(c), seeking
to terminate the plan and to establish July 24, 2003, as the plan
termination date. As has been its practice, see Boivin v. U.S.
Airways, Inc., 446 F.3d 148, 150–51 (D.C. Cir. 2006), the
agency asked that the court appoint it as the trustee of the plan.
While neither Eveleth, as plan administrator, nor the union
opposed termination of the plan or the agency’s appointment as
trustee, the union intervened in the action to oppose the
proposed termination date as “not . . . in the best interests of the
participants of [the] plan.” Later the union withdrew its
opposition to the proposed termination date after reaching an
agreement with Eveleth relating to the sale of Eveleth’s assets.
On August 19, 2004, the district court issued an order
terminating the plan, appointing the agency as trustee, and
establishing July 24, 2003, as the plan termination date.
From December 2006 to May 2007, the agency issued
benefit-determination letters setting forth the monthly payment
each plan participant was entitled to receive. None of the
7
benefits determinations included shutdown benefits. The union
therefore filed an administrative appeal on behalf of
approximately 240 participants who believed they were eligible
for shutdown benefits. On November 30, 2007, the agency’s
Appeals Board issued a final decision concluding that the
agency would not guarantee shutdown benefits for plan
participants because Eveleth had not permanently shut down
before the plan was terminated on July 24, 2003.
The union, on behalf of employees who claimed to be
eligible for shutdown pension benefits, and several individual
employees, brought this action in district court under 29 U.S.C.
§ 1303(f) to challenge the agency’s decision. The district court
rejected plaintiffs’ contention that the agency’s decision is
subject to de novo review, holding instead that the agency’s
decision is entitled to deference and should be reviewed under
the Administrative Procedure Act’s “arbitrary or capricious”
standard. See United Steel, Paper & Forestry, Rubber, Mfg.,
Energy, Allied Indus. & Serv. Workers Int’l Union v. PBGC, 839
F. Supp. 2d 232, 241–44 (D.D.C. 2012). Applying that standard,
the district court granted summary judgment in favor of the
agency. The agency’s “determination that the [Eveleth] plant
had not permanently shut down prior to July 24, 2003,” the court
ruled, “is supported by the record . . . and is rationally connected
to the facts in this case.” Id. at 252.
I
ERISA permits plan participants who are “adversely
affected” by an action of the pension-guaranty agency to bring
suit against the agency in district court, 29 U.S.C. § 1303(f), but
the statute does not specify the standard of judicial review. In
such a case, a court generally must apply the “arbitrary or
capricious” standard of the Administrative Procedure Act, 5
8
U.S.C. § 706(2)(A). See Alaska Dep’t of Envtl. Conservation v.
EPA, 540 U.S. 461, 496–97 (2004).
Plaintiffs contend, however, that the “arbitrary or
capricious” standard does not apply here. Noting that the term
“permanent shutdown” is not defined in Eveleth’s pension plan,
they argue that the agency’s determination was based on its
interpretation of the pension plan—a question of law, according
to plaintiffs, that is subject to de novo review.
We do not see why this matters. The parties do not disagree
about what constitutes a “permanent shutdown.” Plaintiffs and
the agency both say that a permanent shutdown, for purposes of
Eveleth’s pension plan, occurs when the company has no
reasonable expectation of resuming operations. The dispute here
is thus not about the definition of “permanent shutdown.” The
dispute instead is over the application of that definition to the
facts of this case and, in particular, over the significance of the
fact that Eveleth did not maintain the plant in “standby
condition” during the shutdown. In the administrative context,
we generally review an agency’s application of an undisputed
legal standard to a particular set of facts under a deferential
standard. See, e.g., NLRB v. Marcus Trucking Co., 286 F.2d 583,
590–91 (2d Cir. 1961) (Friendly, J.) (treating application of
undisputed legal standard to facts as “question of fact” subject
to “substantial evidence” standard of § 10(e) of the National
Labor Relations Act).4
4
Even if the question here were one of contract interpretation,
that would not end the analysis. This court has concluded that under
certain circumstances it may be appropriate to defer to an agency’s
interpretation of a contract. See Nat’l Fuel Gas Supply Corp. v. FERC,
811 F.2d 1563, 1568–72 (D.C. Cir. 1987). Because the interpretation
of the pension plan is not in dispute here, we do not decide whether
the agency’s interpretation of a pension plan or similar contract is
entitled to any deference.
9
Plaintiffs do not suggest that the company’s failure to
maintain the plant in standby condition is conclusive in
determining whether a permanent shutdown occurred. Their
point is that this should have been a critical factor in the
agency’s analysis. Contrary to plaintiffs’ suggestion, however,
the agency did not reject this factor as irrelevant. Rather, the
agency asserted that the failure to maintain the plant in standby
condition “would [not] foreclose any reasonable likelihood of
resuming operations.” Consolidated Appeals Board Decision,
Case 199929 (Nov. 30, 2007), at 8. (More on this later.) The
agency’s determination was thus largely factual and involved
only the application of an undisputed definition to the facts of
this case. Such a determination is entitled to deference under the
Administrative Procedure Act and “should not be set aside just
because a court would, as an original matter, decide the case the
other way.” NLRB v. United Ins. Co. of Am., 390 U.S. 254, 260
(1968).
II
Although this is a fairly close case, the record provides
sufficient support for the agency’s judgment that a permanent
shutdown had not occurred before Eveleth’s pension plan was
terminated on July 24, 2003. The agency’s determination, in
other words, was not arbitrary or capricious.
In arguing to the contrary, plaintiffs point out the
differences between this shutdown and previous temporary
shutdowns. When the plant was temporarily shut down in the
past, fifteen to twenty hourly employees continued to work
there. But during this shutdown only four hourly employees
stayed on the job. According to one employee’s declaration,
during prior temporary shutdowns the remaining employees
“rotated the second line kiln in order to prevent ‘flat spots’ and
other damage . . . to the equipment.” The employee added that,
10
in contrast, during this shutdown “management instructed the
remaining four workers that it was not necessary to rotate the
kilns.” Although during both past temporary shutdowns and this
shutdown management instructed the employees to move all
vehicles to the parking lot and to leave space between the parked
vehicles in order to prevent excessive damage in the event of a
fire, during this shutdown the company also instructed the
employees to disconnect the batteries in all of the vehicles. And
whereas during previous temporary plant shutdowns most
vendors left their leased equipment at the plant site, in this case
management terminated the vendors’ leases and the vendors
removed their equipment from the plant site.
This evidence tends to weigh against the agency’s finding
and in favor of a finding that the shutdown was in fact
permanent. But in judicial review of agency action, weighing the
evidence is not the court’s function. Rather, the question for the
court is whether there is “such relevant evidence as a reasonable
mind might accept as adequate to support” the agency’s finding
that the shutdown was not permanent. Consolo v. Fed. Mar.
Comm’n, 383 U.S. 607, 620 (1966) (internal quotation marks
omitted). (Although that is a description of the “substantial
evidence” standard, “in their application to the requirement of
factual support the substantial evidence test and the arbitrary or
capricious test are one and the same.” Ass’n of Data Processing
Serv. Orgs., Inc. v. Bd. of Governors of the Fed. Reserve Sys.,
745 F.2d 677, 683 (D.C. Cir. 1984).) This standard leaves open
the possibility of sustaining the agency’s determination even
though one might draw “two inconsistent conclusions from the
evidence.” Consolo, 383 U.S. at 620.
Eveleth’s failure to maintain the plant in standby condition
could signify that the company expected this shutdown to last
longer than those in the past—and that is what the agency
concluded. In the agency’s view, the company’s failure to
11
maintain the plant in standby condition “did not foreclose the
likelihood of resuming operations,” Consolidated Appeals Board
Decision at 9, and in light of evidence that the company was still
seeking to secure new sales contracts in July, two months after
the company ceased operations, we conclude that substantial
evidence supported the agency’s decision.
As plaintiffs point out, Eveleth had stated, in its February
14, 2003, letter to the union’s local district director, that it was
the company’s “intention” to “close permanently” the mining
operation “on or about May 14, 2003.” About a month later the
company notified its employees that the plant was to be closed
on May 15, 2003, but stated that the planned closure was to be
temporary as long as anticipated pellet orders were received
during the shutdown period. Although the notice did not specify
when the “shutdown period” would end or when new orders
would have to be received in order for the plant to resume
operations, it was not unreasonable for the agency to discount
the February letter in light of this notice.
Plaintiffs also point to Eveleth’s June 5, 2003, letter in
support of its petition (on behalf of its employees) for “trade
adjustment assistance,” in which it advised the Department of
Labor that Eveleth “is now totally shut down and only a skeleton
crew is employed.”5 But this letter does not necessarily help
plaintiffs’ case. The letter said nothing about whether that
shutdown was permanent or whether the company expected to
resume operations.
Although we might well be able to uphold as reasonable a
finding in favor of plaintiffs’ position, the record provides
5
Title II, chapter 2, of the Trade Act of 1974, as amended, 19
U.S.C. §§ 2271–2323, created a federal program that provides benefits
and reemployment services to workers who have lost their jobs as a
result of increased imports.
12
sufficient support for the agency’s determination that Eveleth
had not permanently shut down before July 24, 2003.
Accordingly, the district court’s grant of summary judgment in
favor of the agency is
Affirmed.