Maher v. Pension Benefit Guaranty Corporation ( 2017 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
)
)
JEROME A. MAHER, )
)
Plaintiff, )
)
v. ) Case No. 16-cv-1646 (KBJ)
)
PENSION BENEFIT GUARANTY )
CORPORATION, )
)
Defendant. )
)
)
MEMORANDUM OPINION
On March 25, 2015, the Pension Benefit Guaranty Corporation (“PBGC”) denied
Plaintiff Jerome Maher’s claim for benefits under the Employee Retirement Income
Security Act (“ERISA”), 29 U.S.C. §§ 1001–1461, in connection with a pension plan
that was terminated in 1984. Maher filed this lawsuit to challenge the PBGC’s denial
(see Compl., ECF No. 1), and the parties have now filed cross-motions for summary
judgment (see Mem. in Supp. of Def.’s Mot. for Summ. J. (“Def.’s Mem.”), ECF No.
29-1; Mot. to Deny Def.’s Mot. for Summ. J. & Cross-Mot. for Summ. J. (“Pl.’s
Mem.”), ECF No. 31). As explained fully below, this Court concludes that the PBGC’s
decision was not arbitrary or capricious because substantial evidence supported the
PBGC’s finding that Maher received the benefits to which he was entitled in 1984 when
the pension plan was terminated. Accordingly, this Court will GRANT the PBGC’s
motion for summary judgment and DENY Maher’s cross-motion for summary
judgment. A separate Order consistent with this Memorandum Opinion will follow.
I. BACKGROUND
A. The PBGC’s Role In Terminating Pension Plans Under ERISA
“The PBGC is a federal corporation charged with administering and enforcing
the plan termination insurance provisions of ERISA.” Deppenbrook v. PBGC, 778 F.3d
166, 168 (D.C. Cir. 2015) (internal quotation marks and citation omitted); see 29 U.S.C.
§ 1302 (describing the PBGC’s powers and functions). Subject to various statutory
limitations, the PBGC guarantees the payment of benefits under pension plans covered
by ERISA. See 29 U.S.C. §§ 1321–22b. The PBGC also supervises the termination
process for covered pension plans, including plans whose assets are sufficient to cover
all benefit liabilities and whose termination therefore does not trigger the PBGC’s
insurance obligations. See PBGC v. LTV Corp., 496 U.S. 633, 638–39 (1990); see also
29 U.S.C. § 1341(b). ERISA refers to these as “standard” terminations. 29 U.S.C.
§ 1341(b). 1
A standard termination is initiated by a pension plan’s administrator, who must
give all plan beneficiaries notice of intent to terminate the plan at least 60 days before
the proposed termination date. See id. § 1341(a)(2); see also 29 C.F.R.
§ 4041.23(a)(1). 2 The plan administrator must also notify each plan participant of the
benefits to which he is entitled and the basis for calculating that amount. See 29 U.S.C.
1
This opinion cites the statutory and regulatory provisions that apply to single-employer pension plans.
See, e.g., 29 U.S.C. § 1341. ERISA and its implementing regulations contain separate provisions for
multi-employer plans that are not applicable in this case. See, e.g., 29 U.S.C. § 1341a.
2
Several of the statutory and regulatory provisions cited in this paragraph have been amended or
renumbered since 1984 (the year that the pension plan at issue in this case was terminated). See
generally 29 U.S.C. § 1341 (1982); 29 C.F.R. pts. 2616–17 (1984). All of the requirements that appear
in this paragraph have remained substantively similar between 1984 and the present, and for
convenience’s sake, the Court cites the current versions of both ERISA and the PBGC regulations,
except where otherwise noted.
2
§ 1341(b)(2)(B); 29 C.F.R. § 4041.24. In addition to giving notice to all beneficiaries
of a pension plan, the plan administrator must also file a standard termination notice
with the PBGC, alerting the PBGC to the plan’s assets and benefit liabilities. See 29
U.S.C. § 1341(b)(2)(A); 29 C.F.R. § 4041.25(a). Upon receiving this notice, the PBGC
must review it and notify the plan administrator within 60 days if the PBGC believes
that the plan’s assets are not sufficient to cover all benefit liabilities. See 29 U.S.C.
§ 1341(b)(2)(C)(i); 29 C.F.R. § 4041.31(a)(1)(iv).
Absent receiving such a notice from the PBGC, the plan administrator
commences distributing the plan’s assets to its beneficiaries in accordance with a
priority order set forth in ERISA. See 29 U.S.C. §§ 1341(b)(2)(D), 1344; 29 C.F.R.
§ 4041.28(a)(1), pt. 4044. And once this distribution is complete, the plan
administrator must certify in writing to the PBGC that the plan’s assets “have been
distributed . . . so as to pay all benefit liabilities under the plan.” 29 U.S.C.
§ 1341(b)(3)(B); see also 29 C.F.R. § 4041.29. In 1984, the year in which the pension
plan at issue in this case was terminated, PBGC regulations also required that the plan
administrator’s post-distribution certification to the PBGC contain “[t]he amount of the
benefit provided” to “each participant or beneficiary to whom distribution was made[.]”
29 C.F.R. § 2617.23(a)(1) (1984).
B. Factual Background
Plaintiff Jerome Maher began working for First Federal Savings and Loan
Association of Wilmette (“First Federal”) in 1963. (See Letter from Jerome A. Maher
to Charles Korb, PBGC (Mar. 14, 2012), Admin. R. (“AR”), ECF Nos. 28-1 to 28-2,
3
106.) 3 See also Maher v. United States (Maher IV), 92 Fed. Cl. 413, 414 (2010). By
1982, Maher was First Federal’s director and executive vice president. See Maher IV,
92 Fed. Cl. at 414. Maher was also a participant in the company’s employee pension
plan. See id. In 1982, at the behest of federal regulators, First Federal merged with
several other savings and loan associations to form Horizon Federal Savings Bank
(“Horizon”), and Maher stayed on as Horizon’s executive vice president. See id. As
part of the merger, Maher agreed to forfeit his existing First Federal pension plan with
the understanding that Horizon would eventually create a comparable plan for him. See
id. 4
On May 15, 1984, Horizon notified the PBGC that it intended to terminate First
Federal’s pension plan over the course of the coming months. (See Form 5310, AR 10–
14.) Maher personally signed the notice form as Horizon’s executive vice president
(see id., AR 10), and an attachment to the form listed benefit amounts to be distributed
to 25 individual beneficiaries, including $57,834 to Maher (see Form 6088, AR 15).
Shortly before providing the requisite notice to the PBGC, Horizon had sent Maher a
letter notifying him of his entitlements upon the termination of the plan and prompting
him to elect whether to receive his benefits in monthly annuity payments of $1,784
3
Page-number citations to the administrative record refer to the Bates numbers that appear at the
bottom of each page. With respect to all other documents that the parties have filed, page-number
citations refer to the page numbers that the court’s electronic filing system automatically assigns.
4
In several lawsuits across multiple courts, Maher and another former Horizon executive have sought
to recover benefits under a deferred compensation plan that Horizon later established. See Maher IV,
92 Fed. Cl. 413; Maher v. FDIC (Maher III), 441 F.3d 522 (7th Cir. 2006); Maher v. United States
(Maher II), 314 F.3d 600 (Fed. Cir. 2002); Maher v. Harris Trust & Sav. Bank (Maher I), 75 F.3d 1182
(7th Cir. 1996). The plan at issue in those lawsuits was established in 1985 and is different from the
First Federal employee pension plan under which Maher seeks to recover in this case, and which
terminated in 1984. (See Letter from Jerome A. Maher to William F. Condon Jr. (Aug. 21, 2014), AR
129 (explaining that Maher’s claims regarding the two plans “are completely separate”).)
4
beginning on his retirement date in 1999, or in a single lump-sum payment of $57,834
upon the plan’s termination, in which case the distribution could be rolled over “tax-
free” into an individual retirement account. (Letter from Linda S. Sepp, Dir. of Human
Res., Horizon, to Jerome Maher (Apr. 4, 1984), AR 57.)
On September 28, 1984, Horizon’s plan administrator Dominic Cannon wrote to
the PBGC certifying that “[e]ach participant elected in writing the alternative form of
distribution”—i.e., a lump-sum payment. (Plan Admin.’s Certification for an
Alternative Form of Distribution, AR 59). See 29 C.F.R. § 4044.73(a)(1)
(characterizing a “lump sum” payment as an “alternative form of distribution”). 5 Then,
on January 16, 1985, Cannon again wrote to the PBGC, this time “certify[ing] that the
Plan’s assets were allocated in accordance with” ERISA, and attaching a list of benefit
distributions to individual beneficiaries, including a lump-sum benefit of $57,834 to
Maher. (Letter from Dominic Cannon, Vice Chairman and Trustee of the Plan,
Horizon, to Andrew Murphy, Case Officer, PBGC (Jan. 16, 1985) (“Certificate of
Distribution”), AR 17; see also id. 19.) The benefit distribution list clarified that
Maher received a “benefit” of $57,834 at a “cost” to Horizon of $58,754.59. (See
Certificate of Distribution, AR 19.) 6
5
In 1984, PBGC regulations required that a plan administrator submit such a certification to the agency
before distributing benefits in any form other than an annuity. See 29 C.F.R. § 2619.26(a) (1984) (“A
benefit that is payable as an annuity under the provisions of a plan need not be provided in annuity
form if . . . [t]he plan provides for an alternative form of distribution, and the plan administrator
submits a statement to the PBGC in which he or she certifies that[,]” inter alia, “the participant elected,
in writing, the alternative form of distribution[.]”).
6
This difference likely reflected a change in distribution dates: Horizon had calculated benefit amounts
assuming that interest would be credited to each individual’s lump-sum benefit at a rate of 7% from the
proposed termination date of June 1, 1984, through the proposed distribution date of September 1,
1984. (See Form 6088, AR 16.) But in its letter to PBGC certifying the distribution of benefits,
Horizon explained that, at PBGC’s suggestion, it ultimately distributed benefits on November 28, 1984,
not September 1, which would have allowed for more interest to accumulate. (See Certificate of
Distribution, AR 17.)
5
C. Procedural History
Beginning on March 14, 2012—more than 27 years after the termination of the
First Federal pension plan and the purported distribution of its funds to the plan’s
beneficiaries—and continuing until May 24, 2013, Maher wrote a series of letters to the
PBGC, claiming that he was never paid the $57,834 to which he was entitled under the
First Federal pension plan and requesting that the PBGC pay him the guaranteed portion
of that amount. (See, e.g., Letter from Jerome A. Maher to Mark Fifer, PBGC (Jan. 16,
2013), AR 53 (“I never received a lump sum benefit or any other benefit from the First
Federal Savings and Loan Association of Wilmette Retirement Plan.”).) The PBGC
sent a letter to Maher on October 25, 2013, informing him of its “determin[ation] that
there is no basis to support [his] allegations that [he is] owed an unpaid benefit from the
Plan.” (Letter from Charles Korb, Manager, Processing and Technical Assistance
Branch, PBGC, to Jerome A. Maher (Oct. 25, 2013), AR 63.) In reaching this decision,
the PBGC relied on Horizon’s letter to the PBGC (dated January 16, 1985), which
certified that all beneficiaries of the First Federal plan, including Maher, had received
the benefits to which they were entitled. (See id. (observing that “one of the Plan’s
trustees, Dominic P. Cannon, certified that a lump sum benefit of $57,834 was
distributed to you”).) The PBGC decision further noted that Maher’s own assertion that
he was never paid “provides no credible basis to determine that [he] did not receive a
benefit from the Plan[,]” because “it is based on [his] recollection alone of events of
almost 30 years ago[,]” and because it is unreasonable to infer that Maher was not paid
given “the extensive role [he] played in the Plan’s termination and distribution of
benefits, as an Executive Vice President” of Horizon. (Id.)
6
Maher appealed the PBGC’s denial of his request for benefits to the PBGC
Appeals Board in two separate letters dated three days apart in November of 2013. (See
Letter from Jerome A. Maher to PBGC Appeals Board (Nov. 11, 2013) (“Nov. 11
Appeal Letter”), AR 88–89; Letter from Jerome A. Maher to PBGC Appeals Board
(Nov. 14, 2013) (“Nov. 14 Appeal Letter”), AR 55–56.) Maher’s appeal re-emphasized
that he never received a lump-sum benefit in connection with the termination of the
First Federal plan in 1984. (See Nov. 14 Appeal Letter, AR 56.) Maher also contended
that the PBGC’s initial denial decision was wrong both to doubt his recollection (see
Nov. 11 Appeal Letter, AR 88 (“I think I would remember if I received an additional
$57,834 in 1984”)), and to infer that he must have been paid from the fact that he
personally played a significant role in the plan’s termination (see id., AR 89 (stating
that “my only role in the termination of the Pension Plan” was to “sign[] a power of
attorney” to Horizon’s accountants “to provide the actuarial report to satisfy the
[PBGC] that the Plan had sufficient assets to fund the pension obligations”)). Finally,
Maher argued that the September 28, 1984, and January 16, 1985, certification letters
from Cannon to the PBGC are dubious on their face because they state that, with two
exceptions, all participants in the First Federal plan (including Maher) elected to
receive immediate lump-sum payments rather than annuities upon retirement. (See
Nov. 11 Appeal Letter, AR 89; Nov. 14 Appeal Letter, AR 56.) Maher contended that it
would have been unreasonable for each plan participant to have elected a lump-sum
distribution “due to the adverse tax consequences of such a decision[,]” and stated that
he “d[id] not recall doing” so. (Nov. 14 Appeal Letter, AR 56.)
7
The PBGC Appeals Board denied Maher’s appeal in a written opinion on March
25, 2015. (See Letter from William D. Ellis, Appeals Board Member, PBGC, to Jerome
Maher (Mar. 25, 2015) (“PBGC Appeal Decision”), AR 2–9.) The Board noted that
Maher’s appeal “hinge[d] on a factual question, namely whether [he] already received
in 1984 the lump-sum value of [his] Plan benefit.” (Id., AR 5.) In considering that
question, the Board relied primarily on Cannon’s January 16, 1985, certification letter
to the PBGC, which, in the Board’s view, “show[ed that Maher] received [his] benefit
in a lump sum.” (Id., AR 6; see also id., AR 8.) The Board also discounted Maher’s
tax-consequences reasoning, because as Horizon’s April 4, 1984, letter to Maher
explained, any beneficiary who selected a lump-sum payment would have been eligible
for “a non-taxable rollover into another deferred-tax retirement plan[.]” (Id., AR 6.)
The Board also reaffirmed the logic of the initial PBGC denial decision—i.e., that given
Maher’s senior position at Horizon and direct involvement in the termination of the
First Federal pension plan, he would have been in a position to know about and to
correct any error in the distribution of his benefits. (See id., AR 7.) And the Board
reasoned further that Maher’s failure to take any corrective action in 1984 at the time of
the plan’s termination—or even in 1999, when he should have started receiving annuity
payments under his theory that he never selected a lump-sum distribution—discredits
his contention that he did not receive the benefits to which he was entitled. (See id.)
Ultimately, the Board concluded that “[t]he evidence shows [that Maher] received [his]
Plan benefit in a lump sum in 1984.” (Id., AR 8.)
Maher filed the complaint in the instant lawsuit on August 27, 2015, challenging
the PBGC Appeals Board’s decision. (See Compl., ECF No. 1.) See also 29 U.S.C.
8
§ 1303(f) (providing that adverse decisions of the PBGC may be challenged in federal
district court). 7 The parties have filed cross-motions for summary judgment (see Def.’s
Mem.; Pl.’s Mem.), which are now ripe for the Court’s review (see Def.’s Opp’n to
Pl.’s Cross-Mot. for Summ. J. & Reply to Pl.’s Opp’n to PBGC’s Mot. for Summ. J.
(“Def.’s Reply”), ECF No. 32; Pl.’s Reply to Def.’s Opp’n to Pl.’s Mot. for Summ. J.
(“Pl.’s Reply”), ECF No. 35). In its motion, the PBGC asserts that each element of the
Appeals Board’s opinion was reasonable, and that the Board’s ultimate “rejection of
Plaintiff’s claim that he never received his Plan benefit is based on a complete and
reasonable consideration of the evidence.” (Def.’s Mem. at 10.) In his motion, Maher
chiefly contends that the Appeals Board based its conclusion that he already received
his benefits on a misinterpretation of the letter Horizon sent to the PBGC on January
16, 1985. (See Pl.’s Mem. at 3–4.)
II. LEGAL STANDARD
When evaluating a motion for summary judgment pursuant to Federal Rule of
Civil Procedure 56, a district court must “grant summary judgment if the movant shows
that there is no genuine dispute as to any material fact and the movant is entitled to
judgment as a matter of law.” Fed. R. Civ. P. 56(a). In lawsuits challenging agency
action under the APA, a district court acts as an appellate tribunal and evaluates
whether the agency action under review complies with the law and is supported by the
record. See Remper v. Sharfstein, 583 F.3d 860, 865 (D.C. Cir. 2009). Because this
exercise typically involves evaluation of a pure question of law, see id., a district court
7
Maher initially brought this lawsuit in the U.S. District Court for the Northern District of Illinois (see
Compl. at 1), but that court determined that venue was improper and transferred the case to the U.S.
District Court for the District of Columbia (see Mem. Op. & Order, ECF No. 17).
9
presented with cross-motions for summary judgment in an APA case generally does not
focus on whether there is a “genuine dispute as to any material fact[,]” but rather on
whether “the movant is entitled to judgment as a matter of law” under the applicable
APA standard of review. Fed. R. Civ. P. 56(a); see, e.g., New England Anti-Vivisection
Soc’y v. U.S. Fish & Wildlife Serv., 208 F. Supp. 3d 142, 154 (D.D.C. 2016); Ass’n of
Private Sector Colleges & Univs. v. Duncan, 110 F. Supp. 3d 176, 184 (D.D.C. 2015).
As relevant here, under the APA, a district court must set aside agency action if
it is “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with
law[.]” 5 U.S.C. § 706(2)(A); see also LTV Corp., 496 U.S. at 654–56 (reviewing an
informal adjudication of the PBGC under the APA’s arbitrary-or-capricious standard).
“Under that standard, [courts] will uphold agency findings that are supported by
substantial evidence, even if [the court] might have reached a different conclusion in
the first instance.” Epsilon Electronics, Inc. v. U.S. Dep’t of the Treasury, 857 F.3d
913, 918 (D.C. Cir. 2017); see also Safe Extensions, Inc. v. FAA, 509 F.3d 593, 604
(D.C. Cir. 2007) (explaining that even an agency’s decision in the context of an
informal adjudication must be supported by substantial evidence). “The APA’s
substantial evidence standard requires more than a scintilla, but can be satisfied by
something less than a preponderance of the evidence.” Epsilon Electronics, 857 F.3d at
925 (internal quotation marks and citation omitted). An agency’s factual finding is
supported by substantial evidence if “there is such relevant evidence as a reasonable
mind might accept as adequate to support the [agency’s] conclusion.” Mach Mining,
LLC v. Sec’y of Labor, 809 F.3d 1259, 1263 (D.C. Cir. 2016) (internal quotation marks
and citation omitted).
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III. DISCUSSION
Substantial evidence in the record supports the PBGC’s factual finding that
Maher received the benefits to which he was entitled in 1984, when the First Federal
plan was terminated. In making its finding, the PBGC Appeals Board relied in large
part on a letter that Dominic Cannon (the administrator of the First Federal pension
plan) sent to the PBGC on January 16, 1985, notifying the PBGC that the benefits were
distributed. (See PBGC Appeal Decision, AR 3, 6, 8.) That reliance was entirely
reasonable, because the letter expressly “certif[ied] that the Plan’s assets were allocated
in accordance with” ERISA (Certificate of Distribution, AR 17), and it specifically and
unequivocally listed Maher’s “lump sum” benefit of $57,834 in an attached schedule of
benefit distributions (id., AR 19). There is no question that this certification letter,
standing alone, is “relevant evidence” that “a reasonable mind might accept as adequate
to support the [PBGC’s] conclusion.” Mach Mining, 809 F.3d at 1263 (internal
quotation marks and citation omitted). And when one adds to this the fact that Maher—
a Horizon executive who had at least certain responsibilities vis-à-vis the retirement
plan and who unquestionably knew about the scheduled plan termination and
distribution of benefits in the mid-1980s—waited more than 27 years to take any steps
to recover the $57,834 amount that was still allegedly owed to him, it is clear to this
Court that the PBGC’s findings and its denial of Maher’s appeal were well-supported.
Maher’s chief argument to the contrary is that Horizon’s certification letter of
January 16, 1985, was actually a schedule of plan benefit liabilities yet to be paid, and
not a certification of benefit distributions that Horizon had already made. (See Pl.’s
Mem. at 3–4.) But that argument misreads the administrative record in two key
respects. First, Maher contends that the letter could not be a certification of benefits
11
already paid because it “was written January 15, 1984, six months before the Pension
Plan received permission to terminate the Plan.” (Id. at 3 (emphasis added).) In this
regard, Maher simply gets the date wrong: the letter was actually written on January 16,
1985—after the Plan’s distribution date of November 28, 1984. (See Certificate of
Distribution, AR 17.) Second, Maher contends that the list of benefit amounts attached
to the letter appeared on IRS Form 6088, which is a form that ERISA plan
administrators must submit to the PBGC when initiating the plan termination process in
order to facilitate the PBGC’s review of the sufficiency of the plan’s assets, and which
does not serve as a certification of distributions already made. (See Pl.’s Mem. at 3–4.)
But again, Maher’s factual premise is simply incorrect: the schedule of benefit
payments that Cannon attached to his letter to the PBGC was not on IRS Form 6088;
rather, it was a bare, untitled spreadsheet listing each beneficiary’s name, address,
telephone number, sex, date of birth, social security number, benefit amount, the cost to
Horizon of providing that benefit, and the form in which the benefit was provided. (See
Certificate of Distribution, AR 19.) 8
What is more, the spreadsheet that was attached to the January 16, 1985, letter is
entirely consistent with a ‘certification’ that benefits had already been distributed,
because it lists exactly the information that a plan administrator was required to submit
to the PBGC “after the plan administrator has completed the distribution of assets”
under the regulations in place at that time. 29 C.F.R. § 2617.23(a) (1984) (emphasis
8
Maher is correct that IRS Form 6088 appears in the administrative record, but that is because Horizon
submitted Form 6088 as an attachment to its May 15, 1984, notice to the PBGC that Horizon intended
to terminate the First Federal pension plan in the ensuing months (see Form 6088, AR 15)—a notice
that Maher himself signed (see Form 5310, AR 10). Horizon did not include Form 6088 with its
January 16, 1985, letter to the PBGC. (See Certificate of Distribution, AR 17–19.)
12
added); see also id. (requiring, “[f]or each participant or beneficiary to whom
distribution was made[,]” a “[n]ame;” “[a]ddress;” “[t]elephone number;” “[s]ex;”
“[d]ate of birth;” “[s]ocial security number;” “[t]he amount of the benefit provided[;]”
“[t]he cost of providing the benefit;” and “[t]he form in which the benefit was
provided”). And even more fundamentally, Maher’s argument ignores the basic fact
that the letter to which the spreadsheet was attached expressly stated that “[t]his letter
is to certify that the Plan’s assets were allocated in accordance with” ERISA.
(Certificate of Distribution, AR 17 (emphasis added).)
Thus, this Court finds that the certification letter itself provides ample support
for the PBGC Appeals Board’s conclusion that Maher received the benefits to which he
was entitled, and it agrees with the Board that Maher’s failure to take any prior
corrective action further demonstrates that there is no factual basis for his current
claim.
IV. CONCLUSION
The PBGC denied Maher’s claim for benefits under a pension plan that was
terminated in 1984 because it found, as a matter of fact, that Maher already received the
benefits to which he was entitled under that plan. That factual finding was supported
by substantial evidence in the administrative record, and therefore the PBGC’s decision
cannot be set aside as arbitrary or capricious under the APA. See 5 U.S.C. § 706(2)(A).
Consequently, as set forth in the separate Order that accompanies this Memorandum
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Opinion, the PBGC’s motion for summary judgment is GRANTED and Maher’s cross-
motion for summary judgment is DENIED.
DATE: September 26, 2017 Ketanji Brown Jackson
KETANJI BROWN JACKSON
United States District Judge
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