Joseph Fisher v. PBGC

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

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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

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(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

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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

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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

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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

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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

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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.