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PINEIRO v. PENSION BENEFIT GUARANTY CORPORATION

August 26, 2003

AL PINEIRO, RICHARD BROOKS, AND LEONARD BEAUMONT, ON BEHALF OF THEMSELVES AND OTHERS SIMILARLY SITUATED, PLAINTIFFS AGAINST PENSION BENEFIT GUARANTY CORPORATION, AS TRUSTEE OF THE PAN AMERICAN WORLD AIRWAYS, INC., COOPERATIVE RETIREMENT INCOME PLAN, DEFENDANT


The opinion of the court was delivered by: Gerard E. Lynch, District Judge

OPINION AND ORDER

Plaintiffs Al Pineiro, Richard Brooks, and Leonard Beaumont (collectively, "plaintiffs")*fn1 are participants in the Cooperative Retirement Income Plan (the "Plan") that was maintained by Pan American World Airways ("Pan Am") until it was terminated in 1991 as a result of Pan Am's [ Page 2]

bankruptcy. They bring this action against defendant Pension Benefit Guaranty Corporation ("defendant" or "PBGC"), alleging that, after it was appointed to serve as austee for the Plan and to oversee its termination, it breached its fiduciary duty to plaintiffs by taking a number of actions that were not in their best interests, and by failing to act with due care. Plaintiffs bring this suit pursuant to the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq., seeking removal of PBGC as trustee and other equitable relief. and under the Administrative Procedure Act, 5 U.S.C. § 706(1), seeking an order compelling PBGC to complete its process of issuing benefit determinations to Plan participants. Both parties now move for summary judgment. For the reasons discussed below, both motions will be granted in part and denied in part.

BACKGROUND

I. The Statutory Framework

ERISA was enacted in 1974 to regulate the nation's employee retirement plans, after Congress concluded that "the continued well-being and security of millions of employees and their dependents are directly affected by these plans; [and] that owing to the termination of plans before requisite funds have been accumulated, employees and their beneficiaries have been deprived of anticipated benefits." 29 U.S.C. § 1001 (a). Thus, in addition to establishing the standards for ongoing pension plans, ERISA regulates the process by which plans are terminated, in order to ensure that beneficiaries of terminated plans receive the benefits to which they are entitled. To this end, Title IV of ERISA, which governs plans subject to termination, provides that PBGC, a wholly-owned government corporation, will insure certain benefits provided by all employer-sponsored defined benefit plans, so that employees will receive them even when the [ Page 3]

plan itself does not have enough assets to cover its benefit liabilities.*fn2 PBGC v. LTV Corp., 496 U.S. 633, 636-37 (1990).

When an employer is no longer financially able to sponsor its retirement plan, PBGC may apply to a court for a decree of termination, in order to prevent the continued accrual of benefits from exponentially increasing PBGC's liability for insured benefits. 29 U.S.C. § 1341, 1342(a), (c). When the court finds that a plan must be terminated, Title IV mandates that the court appoint a trustee "to terminate" the plan, and to replace the plan administrator, which oversaw the plan while it was ongoing. Id. § 1342(c). In practice, PBGC has always applied to be appointed the trustee of terminated plans, and courts have invariably granted its application. LTV Corp., 496 U.S. at 637. The trustee is given a number of powers that, combined, allow it to invest or liquidate plan assets, pay benefits, litigate, and generally perform any necessary task in administering the plan. Id. § 1342(d).

The trustee is a fiduciary within the meaning of ERISA, id. § 1342(d)(3); id. § 1002(21), and therefore owes the plan and its beneficiaries duties of care and loyalty. The trustee must exercise its various powers for the exclusive purpose of providing benefits to participants and their beneficiaries, with the "care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity . . . would use." Id. § 1104(a)(1)(A)(i), (B). In addition, the trustee is given the same duties given to Chapter 7 bankruptcy trustees, id. § 1342(d)(3), including "clos[ing] such estate as expeditiously as is compatible with the best interests of the parties in interest," and "furnish[ing] such information concerning the estate and [ Page 4]

the estate's administration as is requested by a party in interest." 11 U.S.C. § 704. The trustee's fiduciary duties are not absolute, however. Since terminating a plan usually involves allocating assets that are insufficient to cover the plan's benefit obligations, the trustee is explicitly authorized to take a number of actions that might otherwise violate us fiduciary duties, such as recovering benefits paid to participants shortly before the plan was terminated, 29 U.S.C. § 1345(a), and limiting the payment of benefits to guaranteed benefits, id. § 1342(d)(1)(A)(iv).

When the court issues a decree of termination, it sets a "termination date" as the date on which all benefits under the plan cease to accrue. Id. § 1348. Thereafter, the trustee notifies all plan participants and employers involved in the plan that it will be terminated. Id. § 1342(d)(2). As necessary, the trustee may recover debts to the plan, including benefit overpayments, and may liquidate the plan's assets. Id. § 1342(d)(1)(B). Then the "plan administrator" (in practice, the trustee) must allocate the plan's existing assets among those entitled to benefits, in the priority specified by § 1344(a).*fn3 This may involve undertaking an intensive review of the plan documents, auditing its assets, and determining actuarial values in order to calculate the amount of benefits to which each participant is entitled under the plan. To assist in the calculations, PBGC and the plan administrator are required to provide a variety of plan information to the trustee. Id. § 1346. If the plan's current assets are insufficient to cover its liabilities — in other words, if the plan is underfunded — PBGC, as the guarantor of pension benefits, uses its own funds to pay those [ Page 5]

benefits that are "nonforfeitable" because participants' entitlement to them has vested by the date of termination. LTV Corp., 496 U.S. at 637. The process of determining which benefits are insured by PBGC can itself be complex, as PBGC must determine which benefits are nonforfeitable under the terms of the plan, and are not subject to the lengthy list of exceptions enumerated in § 1322(b). To this end, PBGC has promulgated a number of regulations that interpret the relevant statutory provisions and specify what types of benefits are guaranteed. See 29 C.F.R. pt. 4022. Because PBGC has always had itself appointed trustee of the plans it seeks to terminate, it must fulfill all of the functions of both trustee and guarantor with respect to all plans subject to termination.

The termination framework ensures that those who are already receiving benefits at the time of the plan's termination continue to receive them, and that those who have earned benefits receive some proportion of what they were expecting. LTV Corp., 496 U.S. at 636-37. At the same time, however, the termination of an underfunded plan inevitably creates hardship for plan beneficiaries, as the termination often occurs concurrently with the employer's bankruptcy and the loss of all of its employees' jobs, and only limited benefits will be guaranteed and paid by PBGC. Moreover, plans involving thousands of participants necessarily require extended research into plan documents and practice, and the actuarial calculations and determinations as to whether a particular participant's benefits are guaranteed can take years, subjecting the participants to financial uncertainty even as they approach the age at which they expected to retire.

II. Pan Am's Retirement Plan

The following paragraphs summarize the facts asserted by the parties, indicating the areas in which disputes exist. [ Page 6]

Plaintiffs were employed as Pan Am ground personnel until they were involuntarily terminated on December 4, 1991, as a result of Pan Am's bankruptcy and liquidation. (PL Mem. 7.) All three had worked for Pan Am for at least 25 years when their jobs disappeared, and all were a few years short of 55, the age at which they would have become eligible for subsidized early retirement benefits. (PL Mem. 7-8; Am. Compl. ¶¶ 8-10.) As employees, they were participants in Pan Am's Cooperative Retirement Income Plan the "Plan"), a defined benefit plan governed by ERISA. The plan was sponsored and administered by Pan Am, and covered over 39,000 employees. (Def. Mem. 3.) Beginning in the 1980s, Pan Am's increasing financial difficulties led it to seek, and obtain, a series of minimum funding waivers that allowed it to contribute less to the Plan that otherwise required by law. (Katz Aff. Ex. 37 at 4.) By 1991, the Plan was so severely underfunded that PBGC instituted proceedings to terminate it, pursuant to 29 U.S.C. § 1342(c), on the grounds that if the plan were allowed 10 continue, PBGC would have to "disburse substantial sums in order to provide plan benefits to plan beneficiaries." In re Pan Am. World Airways, Inc., Cooperative Retirement Income Plan, 777 F. Supp. 1179, 1181 (S.D.N.Y. 1991). On November 25, 1991, this Court (the Hon. Michael B. Mukasey, U.S.D.J.) ordered the Plan terminated as of July 31, 1991, the date at which Pan Am employees had constructive notice of the termination. Id. Pan Am and PBGC later agreed that PBGC should be appointed as trustee to terminate the Plan. (Def. Ex. 15.)*fn4

Upon termination, PBGC began the process of recovering and valuing the Plan's assets, receiving $110 million from the Pan Am bankruptcy estate in settlement of its claims in 1994. [ Page 7]

(Def. R. 56.1 Statement ¶ 29.) The process of valuation was complete by 1996. (Id.) At the same time, PBGC collected and audited participant data, an endeavor that was hindered by Pan Am's allegedly "mislabeled and insufficient" records. (Def. Mem. 9; Def. R. 56.1 Statement ¶ 23.) Thus, PBGC was forced to review every individual personnel file, collect and catalog missing information, and reconcile Pan Am's information with that submitted by participants. PBGC completed its audit for participants who it had determined were not eligible for benefits because they were not Plan participants by early 1995, but did not complete its audit of non-vested participants until over a year later. (Def. R. 56.1 Statement ¶¶ 32, 35.) It finally produced a master database of all participant data in August 1997. (Id. ¶ 38.)

Meanwhile, after valuing the Plan's existing assets, PBGC began allocating the assets according to categories of benefit liabilities, as provided in § 1344. (Id. ¶¶ 29, 42.) This involved locating and collecting Plan documents in New York, New Jersey, and Florida, and auditing them to determine which ones actually governed the Plan. (Id. ¶ 41.) By March 1998, PBGC had finalized its collection of Plan documents, which consisted of 102 documents totaling 2,600 pages. (Id.)

Even before it had finished collecting the Plan documents, PBGC had begun to issue benefit determination letters ("BDLs"), as it determined participants' entitlement to benefits under the Plan and whether their benefits were guaranteed. (Id. ¶¶ 32-34.) In 1995, PBGC issued roughly 18,000 BDLs to Pan Am employees who were not entitled to benefits because they were not participants in the Plan, as well as those participants whose entitlements had not yet vested at the time of termination. (Def. R. 56.1 ¶ 52.) By May 1999, PBGC had issued all of the BDLs for which it had sufficient information to make a determination. As of April 2003, only 205 [ Page 8]

determinations remained to be made, 127 of which involved missing participants,*fn5 and 78 of which involved recently discovered participants. (Id. ¶ 54.) Of the 49,459 BDLs issued, 4,161 were appealed, and PBGC's Appeals Board has completed its review of all but 22 of the appeals. (Def. Mem. 28.)

Thus, PBGC took roughly eight years from its appointment as trustee of the Plan to finish issuing the bulk of its BDLs, a result that is perhaps not surprising in light of the limited resources that it was able to devote to the Plan. Upon being appointed trustee, PBGC assigned the administration of the Plan to its Trusteeship Processing Division 5 ("TPD 5"), which devoted between three and six employees to the Plan at all relevant times. (LaPiana Dep. I at 35-39.) In addition, PBGC hired outside contractors to assist with the workload. Office Specialists served as the Plan's field benefits administrator, maintaining between two and ten auditors in a Rosedale, New York, office for the purposes of answering participant questions, collecting participant information, and reviewing participant and plan data. (Def. R. 56.1 Statement ¶ 19.) Office Specialists hired several former employees from Pan Am's pension department to assist it in collecting Plan documents and interpreting Plan practices. (Id.) In 1995. PBGC relocated the Office Specialists group to Atlanta in order to reduce its operating costs, over the objections of Suzanne LaPiana, the Manager of TPD 5, who felt that the move would severely reduce the quality and timeliness of Plan servicing. (Katz Aff Ex. 32.) PBGC also employed Milliman USA as its actuarial contractor, to create a master list of all Plan participants, to calculate various benefit amounts and plan liabilities, and to create a computer program to calculate benefits. (Def. [ Page 9]

R. 56.1 Statement ¶¶ 22, 24.)

By 1995, Plan participants were beginning to question PBGC's administration of the Plan. In 1993, plaintiffs had formed the Association of Former Pan Am Employees, Inc. ("AFPAE"), to advocate on behalf of former Pan Am employees with respect to PBGC. (PL R. 56.1 Statement ¶ 21; Def. Ex. 63.) AFPAE made the first of several Freedom of Information Act ("FOIA") requests for information from PBGC in August 1995, seeking all documents relating to the decision to terminate the Plan and all records of PBGC's actions as the Plan's trustee. (Def. R. 56.1 Statement ¶ 67.) PBGC was apparently adequately responsive to this and subsequent AFPAE FOIA requests, as plaintiffs do not allege that they failed to receive any of the information requested in this manner.

After plaintiff Brooks was denied subsidized early retirement benefits in 1997, he requested documents related to PBGC's calculation of his benefits in order to facilitate his appeal. (Brooks Dep. at 126-27.) PBGC allegedly refused to provide this information except pursuant to a FOIA request (id.), although it waived the associated fees (Def. Mem. 39 n. 18), because it viewed all Plan documents as "agency records" that could only be obtained through FOIA. Plaintiffs assert that they made other requests and were told to use FOIA (Katz Aff. Ex. 42), despite their lawyers' repeated assertions that PBGC's insistence on FOIA procedures was improper, since PBGC had an independent legal duty, as trustee of the Plan, to provide requested information to Plan participants. (Id.)

III. The History of This Litigation

This case has been litigated for almost as many years as it took PBGC to issue its benefit determinations. Plaintiffs filed suit in September 1996, before PBGC had issued BDLs for the [ Page 10]

bulk of the Plan participants, and before any of the plaintiffs had received their BDLs. The initial Complaint alleged that PBGC had breached its fiduciary duty as the Plan trustee by refusing to issue BDLs for five and a half years after being appointed trustee. delaying responses to FOIA requests, commingling Plan assets, and acting in its own financial interest to minimize guaranteed benefits, rather than in the interests of Plan participants. (Compl. ¶¶ 4, 12.) The case was assigned to Judge Preska, who then decided three motions to dismiss by PBGC, all centered on the issue of whether PBGC acts in its capacity as trustee when it calculates benefits, and therefore owes fiduciary duties to the Plan and its participants.

In November 1997, Judge Preska ruled on PBGC's initial motion to dismiss the Complaint. Pineiro v. PBGC ("Pineiro I"), No. 96 Civ. 7392 (LAP). 1997 WL 739581 (S.D.N.Y. Nov. 26, 1997). She held that PBGC acted as guarantor in calculating benefit amounts, and that therefore its actions related to this function could not give rise to a claim for breach of fiduciary duty. Because 29 U.S.C. § 1346, which provides that PBGC or the plan administrator "shall furnish to the trustee" information regarding "the amount of benefits payable with respect to each participant," applies even when PBGC is not appointed the trustee of a terminated plan, she concluded that PBGC must act as guarantor when it calculates benefits. Id. at *9-*10. In contrast, the issuance of benefit determinations, after the amounts had been calculated, appeared to be a trustee function, as Title IV gives the trustee the power to pay benefits, 29 U.S.C. § 1342(d)(1)(B)(i). Pineiro I, 1997 WL 739581, at *10-*11. Therefore, plaintiffs' claim that PBGC violated fiduciary duties in calculating benefits necessarily failed, while their claim that the agency was dilatory in issuing BDLs could go forward. Judge Preska also suggested that plaintiffs amend their complaint to allege that, insofar as the delay in benefit calculations and the issuance [ Page 11]

of BDLs was due to PBGC's actions as guarantor, PBGC had "unreasonably delayed" action and should be compelled to act, pursuant to § 706(1) of the Administrative Procedure Act ("APA"). Id. at *19 & n. 16; see also 5 U.S.C. § 706(1) (providing that federal courts may compel "unlawfully withheld or unreasonably delayed" agency action). Finally, Judge Preska resolved several other issues against the plaintiffs, finding that the trustee of a terminated plan had no duty to police PBGC's actions as guarantor, that FOIA was the sole means by which Plan participants could obtain information about their benefits, and that as § 1342(a) specifically permitted PBGC to commingle plan assets, plaintiffs could not base a breach of duty claim on such commingling. Pineiro I, 1997 WL 739581, at *12-*18.

Plaintiffs filed their second amended complaint on January 15, 1998, alleging once again that PBGC had acted as trustee in calculating benefits, and had violated its fiduciary duties. (Am. Compl. ¶¶ 39-41.) In support of this assertion, plaintiffs attached to the Amended Complaint an internal PBGC memorandum that suggested that PBGC itself viewed benefit calculation as a trustee function. (Id. Ex A.) The Amended Complaint also sought relief under 5 U.S.C. § 706(1) for PBGC's unreasonable delay in issuing BDLs, to the extent that PBGC acted as guarantor. (Id. ¶¶ 85-86.) Finally, plaintiffs modified their allegations that PBGC had breached its fiduciary duty by failing to disclose information, claiming that PBGC had insisted that plaintiffs use FOIA to obtain benefits-related information that, as trustee, it was obligated to disclose under 11 U.S.C. § 704. (Id. ¶ 73.)

A month later, PBGC filed its second motion to dismiss, arguing that the amended complaint simply re-alleged claims that had been dismissed as a result of its first motion. In Pineiro v. PBGC ("Pineiro II"), No. 96 Civ. 7392 (LAP), 1999 WL 195131 (S.D.N.Y. Apr. 7, [ Page 12]

1999), Judge Preska acknowledged that the law of the case doctrine would ordinarily preclude plaintiffs from raising the same claims that she had already dismissed, but found that the Amended Complaint and its attached exhibit "prompted a fresh look" at ERISA and her interpretation of its relevant provisions. Id. at *1-*2. She noted that § 1346, on which she had relied in Pineiro I in concluding that the calculation of benefits was a guarantor function, did not "expressly forbid the trustee from calculating benefits," and that "if the trustee were to carry out that responsibility, that would not be inconsistent with any provision of Title IV." Id. at *2. Thus, in Pineiro II Judge Preska held that plaintiffs might be able to prove facts that would support their theory that PBGC had acted as trustee in calculating benefits, and denied PBGC's motion to dismiss "as premature." Id. PBGC then moved for reconsideration. and to certify the issue for interlocutory appeal to the Second Circuit; Judge Preska denied both motions.

In May 1999, PBGC renewed its motion to dismiss the Amended Complaint, and in March 2000, Judge Preska issued a third opinion, denying the motion and expanding on her reasoning in Pineiro II. Pineiro v. PBGC ("Pineiro III"). No. 96 Civ. 7392, 2000 WL 282894 (S.D.N.Y. Mar. 15, 2000). She reiterated her conclusion that, taking the provisions of Title IV together, the statute does not expressly prohibit the trustee from calculating benefits, and that therefore plaintiffs must be given the opportunity to prove that PBGC acted as trustee in calculating benefits. Id. at *2. She vacated that portion of Pineiro I that had held that PBGC as trustee had no duty to police the actions of PBGC as guarantor, finding that because § 1303(f)(1) allows the trustee to sue PBGC, "plaintiffs may state a claim for breach of fiduciary duty in cases where the PBGC takes actions as a guarantor that are uncontested by the PBGC as trustee due to conflicting interests." Id. at *3. Judge Preska also held that, insofar as PBGC, in its capacity as trustee, was [ Page 13]

obligated to provide information about the Plan upon request, see 11 U.S.C. § 704, its refusal to do so except pursuant to FOIA's burdensome procedures could constitute a breach of fiduciary duty. Pineiro III, 2000 WL 282894, at *5-*6. Finally, she dismissed plaintiffs' claim of breach of fiduciary duty arising from PBGC's alleged mishandling of Plan participants' appeals of their BDLs, ruling that PBGC's administrative review process was a governmental function that was not subject to a fiduciary duty. Id. at *4.

Not content to proceed with discovery on plaintiffs' alternate theories of breach of fiduciary duty and unreasonable delay of agency action, PBGC sought, and obtained, certification for an interlocutory appeal to the Second Circuit Court of Appeals. Judge Preska then stayed all further proceedings, pending the Circuit's review; the case was consequently stayed from April 2000 until November 2001. Although the Court of Appeals had granted PBGC's motion for leave to appeal, it later issued a summary order dismissing the appeal because the certification was improvidently granted. Pineiro v. PBGC, 22 Fed. App. 47 (2d Cir. 2001) (unpublished opinion). The panel reasoned that its decision on the fiduciary duty issue would not terminate the case, since if it found that PBGC acted as guarantor in calculating benefits, plaintiffs would simply proceed with their APA claim. Id. at 49. Moreover, a more developed record would help the court to resolve the "complicated questions of statutory interpretation," which the panel would be "unwilling to decide . . . without first soliciting an amicus brief from the Department of Labor, and perhaps . . . from others as well." Id.

The case was reassigned to me in September 2000, while district court proceedings were stayed pending the Circuit's decision. Following the return of the case from the Court of Appeals at the end of 2001, discovery finally began in earnest in early 2002. Having now completed [ Page 14]

discovery, the parties cross-move for summary judgment.

DISCUSSION

I. The Parties' Contentions

Both parties' summary judgment papers are primarily devoted to re-arguing the merits of Pineiro III, focusing on whether PBGC is subject to a fiduciary duty to Plan participants. Although both Judge Preska and the Second Circuit believed that discovery would clarify the questions of statutory interpretation that are fundamental to this case, neither party relies on facts learned in discovery in making their arguments as to what are essentially legal, not factual, issues. Resolving the question of PBGC's fiduciary duty entails discerning the statute's direction as to how PBGC should divide its functions when it serves as trustee and guarantor for a single plan, so that even if discovery revealed that PBGC in fact internally distinguished between its guarantor and trustee functions, or promulgated regulations on the subject, the question would remain whether PBGC's actions in this respect were consistent with the statute. Thus, even after a year of discovery, determining whether PBGC acts as trustee in calculating benefits, and is therefore subject to fiduciary duties, involves extrapolating from the powers and duties given to the trustee by Title IV, as well as the statute's structure and legislative history.

It is also striking, in view of the multiplicity of judicial opinions that this case has already occasioned, that neither party attempts to invoke the law of the case doctrine. This is perhaps understandable since, even after four decisions, very few legal issues have been authoritatively decided. Judge Preska herself vacated most of Pineiro I, and Pineiro III was considered by the Second Circuit but neither approved nor disapproved. The Court of Appeals' opinion itself did not establish any principles of law to guide the parties. Thus, notwithstanding the amount of [ Page 15]

judicial and attorney effort that has gone into this case, both parties are, in a sense, starting from scratch, and their legal arguments reflect the fact that the past seven years of litigation have yielded little progress.

Plaintiffs argue that, as Judge Preska concluded in Pineiro III, the broad powers given to the trustee include the power to calculate benefits. Moreover, the fact that the trustee must be provided with information regarding a plan's asset value and present liabilities, and is specifically given the power to hire actuaries, indicates congressional intent to place the responsibility for benefit calculations with the trustee. (PL Mem. 35-38.) PBGC was therefore subject to the trustee's fiduciary duties in taking over the Plan and issuing BDLs. It allegedly breached its duty of loyalty by failing to separate its trustee and guarantor functions, and by taking actions in its own interest rather than in the interests of Plan participants. It also allegedly breached its duties of care and loyalty in taking an unreasonable amount of time to calculate and issue benefits, inadequately staffing the Plan, employing inadequate contractors, failing to properly interpret Plan documents, failing to disclose participant documents except through FOIA, and failing to provide an adequate appeals procedure. (PL Mem. 44-48.) Plaintiffs argue that they have established these breaches as a matter of law, and are therefore entitled summary judgment and to "appropriate equitable relief under § 1303(f), including the removal of PBGC as trustee and the appointment of a private trustee. (Am. Compl. ¶ 83; PL Mem. 44.)*fn6

PBGC argues that Judge Preska was right the first time, and seeks a return to the holding of Pineiro I, contending that Pineiro III incorrectly held that Title IV allows the trustee to calculate benefits. PBGC contends that the trustee's duties with respect to a terminated plan are essentially [ Page 16]

ministerial. Because the statutory trustee is appointed "to terminate" a plan, 29 U.S.C. § 1342(c), the trustee's participation ends relatively soon after the termination date set by the court. (Def. Mem. 23; Def. Opp. 6.) Thus, once PBGC had collected the assets of the Plan, it ceased to function as trustee, and took all subsequent actions in its governmental, guarantor capacity. (Def. Mem. 23.) In addition, defendant argues that even had it been subject to a fiduciary duty, plaintiffs have proffered no facts that could establish that defendant breached that duty. (Id. 27-34.)

II. Summary Judgment Standard

When adjudicating motions for summary judgment, a court must resolve all ambiguities in favor of the nonmoving party, although "the nonmoving party may not rely on conclusory allegations or unsubstantiated speculation." Scotto v. Almenas. 143 F.3d 105, 114(2d Cir. 1998). The court "is not to weigh the evidence but is instead required to view the evidence in the light most favorable to the party opposing summary judgment, to draw all reasonable inferences in favor of that party, and to eschew credibility assessments." Weyant v. Okst, 101 F.3d 845, 854 (2d Cir. 1996). Summary judgment is then appropriate if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits . . . show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c).

To establish a genuine issue of material fact, the opposing party "`must produce specific facts indicating' that a genuine factual issue exists." Scotto, 143 F.3d at 114 (quoting Wright v. Coughlin, 132 F.3d 133, 137 (2d Cir. 1998)); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). "If the evidence [produced by the nonmoving party] is merely colorable, or is not [ Page 17]

significantly probative, summary judgment may be granted." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50 (1986) (internal citations omitted). "The mere existence of a scintilla of evidence in support of the [non-movant's] position will be insufficient; there must be evidence on which the jury could reasonably find for the [non-movant]." Pocchia v. NYNEX Corp., 81 F.3d 275, 277 (2d Cir. 1996) (quoting Liberty Lobby, 477 U.S. at 252).

III. The Trustee's Role in Terminating a Plan

Title IV is designed to protect the interests of retirement plan beneficiaries when the employer is no longer able to sponsor the plan, and the plan has insufficient assets to cover its liabilities. These beneficiaries are unquestionably the most vulnerable of those protected by ERISA, as they often lose their jobs as a result of their employer's financial difficulties, even as they face the possibility that their expected pension benefits will be severely reduced or lost altogether. S. Rep. No. 93-383 (1973), reprinted in 1974 USCCAN 4889, 4892. Thus, Title IV provides two protections for participants in terminated plans: mandatory benefits insurance administered by PBGC, and the appointment of a trustee to ensure that the termination of the plan is carried out in the best interests of the beneficiaries. Congress could have assigned sole responsibility for plan terminations to PBGC in its capacity as agency and guarantor; instead, it provided that a trustee subject to duties of care and loyalty should oversee each termination. This represents a judgment that simply providing the insurance and assigning the guarantor sole responsibility for terminating a plan would not sufficiently protect beneficiaries' rights and interests.

Thus, Title IV must be interpreted in light of the fact that Congress expected the termination process to be regulated by the fiduciary-beneficiary relationship. It is also clear, [ Page 18]

however, that Congress could not have intended the trustee to be bound to unmodified traditional fiduciary standards of conduct. Most fundamentally, Congress provided that PBGC, always the guarantor of terminated plan benefits, could also act as trustee. 29 U.S.C. § 1342(b), allowing the agency dual roles that, to some extent, create an inherent conflict of interest. While PBGC need not always serve as trustee, a fact that in itself renders the statute's provisions somewhat indeterminate, the statute's contemplation of PBGC's performing dual roles colors its conception of the trustee as a fiduciary, because it establishes that the trustee, unlike common law trustees, may have multiple fiduciary obligations to different plans, and thus conflicting responsibilities. Title IV also makes the trustee's fiduciary duty subject to the duties involved in termination, and authorizes the trustee to take various actions that, if performed by a traditional fiduciary, would constitute breaches of duty. For a striking instance, PBGC, in its capacity as trustee, is permitted to commingle the assets of the plans it trustees. Id. § 1342(a).

Thus, Congress clearly envisioned the trustee, at least when PBGC plays the role, as having somewhat different responsibilities than a traditional, common law fiduciary or even a Title I fiduciary of an ongoing plan. Plaintiffs envision PBGC in its trustee role as a traditional fiduciary, bound to the standard of "the punctilio of an honor the most sensitive,"Meinhard v. Salmon, 249 N.Y. 458, 464 (1928) (Cardozo, C.J.), and conclude that the agency is obliged to maintain absolute separation between its functions, to act as trustee solely in the interests of the plan, and even under some circumstances to sue itself. (Pl. Mem. 39-41.) But because Congress deliberately assigned PBGC the possibility of inhabiting dual roles, with potentially conflicting obligations, it is difficult to determine the boundaries of the trustee's fiduciary obligations. Nonetheless, Title IV's language, structure, and legislative history indicate that Congress intended [ Page 19]

that the trustee, not PBGC as guarantor, would have responsibility for reconstructing the plan's documents, as well as calculating and paying benefits. Subject to the limitations inherent in the statute, when PBGC serves as trustee, it performs these functions as a fiduciary to the plan's beneficiaries.

Title IV provides that, after PBGC has sought and obtained the termination of an underfunded plan, the court appoints a trustee, and "authorize[s] him[] to terminate the plan in accordance with the provisions of this subtitle." 29 U.S.C. § 1342(c). As an initial matter, the parties disagree on what it means to "terminate" a plan, what tasks and functions termination entails, and when termination is complete. PBGC argues that terminating a plan involves merely collecting its assets, recovering amounts owed to the plan, and turning those assets over to PBGC for payment of benefits. (Def. Mem. 23.) Only then does PBGC, as guarantor, begin to calculate benefit amounts. (Id.) This theory is belied, however, by the broad powers granted to the trustee. The fact that the trustee may "do any act authorized by the plan or this subchapter to be done by the plan administrator," 29 U.S.C. § 1342(d)(1)(A)(i), suggests that terminating a plan is more akin to administering an ongoing plan than PBGC asserts (Def. Opp. 2-4).*fn7 If terminating a plan consisted merely of rounding up the assets and transferring them to PBGC, there would be no need for the trustee to perform the functions of the former plan administrator, which could include interpreting the plan and doing any other act authorized by the plan itself. Other powers given to [ Page 20]

the trustee, such as litigating on behalf of the plan, 29 U.S.C. § 1342(d)(1)(B)(iv), and investing the plan's assets, id. § 1342(d)(1)(A)(iii), also indicate that plan termination can be a long-term process involving ongoing oversight of the plan as a whole.

PBGC argues that the fact that the trustee's fiduciary duties are expressly made subject to the provisions of Title IV, id. § 1342(d)(3), indicates that a Title IV trustee's fiduciary duties are so limited that the trustee's responsibilities in terminating a plan must be essentially ministerial. (Def. Mem. 22-23.) Section 1342(d)(3) provides that a trustee has the same fiduciary duties of care and loyalty owed by fiduciaries of ongoing plans, as well as the specific duties of a Chapter 7 bankruptcy trustee, "[e]xcept to the extent inconsistent with the provisions of [Title IV]." There is no indication amongst the other provisions of Title IV, however, that the trustee's fiduciary duties are drastically circumscribed, because the duties inhere in all discretionary actions taken by the trustee. 29 U.S.C. § 1002(21). As Judge Preska noted in Pineiro I, several of Title IV's provisions mandate that the trustee take certain actions, including preventing the plan's assets from inuring to the benefit of the employer, id. § 1103(c), avoiding increasing PBGC's liability, id. § 1342(d)(1)(A)(vi), and allocating the assets to some participants at the expense of others, id. § 1344. Pineiro I, 1997 WL 739581, at *2. These provisions supersede the trustee's fiduciary duty because they require that certain actions be taken, even if such actions would normally be a breach of the duty of loyalty if taken by a traditional fiduciary. Id. Aside from these mandatory provisions, the trustee is given a number of discretionary powers that allow it to administer the plan and manage its assets. Since the trustee's discretion with respect to these powers, which provide the bulk of its oversight authority, is not limited, and plan trustees are bound by fiduciary duty to the extent that they exercise discretionary authority with respect to the plan, 29 U.S.C. § 1002 [ Page 21]

(21), 1104(a), the trustee's fiduciary duties inhere in its general oversight of the plan.*fn8 While the scope of the duties must be determined in light of the fact that the trustee is not a traditional fiduciary, and the needs of participants of terminated plans are often different from the needs of ongoing plan participants, the "provisions of [Title IV]" are certainly not so inconsistent with fiduciary duties as to render them meaningless, as PBGC appears to argue. (Def. Mem. 23.) PBGC's interpretation would render § 1342(d)(3)'s explicit imposition of the general duties of care and loyalty on Title IV trustees superfluous. Thus, there is no basis to believe that the trustee's responsibilities and fiduciary duties are so limited that terminating a plan involves only ministerial functions.

This interpretation is supported by the fact that the statute does not provide an endpoint at which the plan is completely terminated and the trustee's tasks are complete. Section 1348 provides that the court shall set a "termination date" as the date on which benefits stop accruing. This date is the date on which all participants had constructive notice that the plan might be terminated. In re Pan Am. World Airways, 777 F. Supp. at 1184. The trustee who is authorized "to terminate" the plan under ยง 1342(c) is often not appointed until after the termination date, however, indicating that the termination date is relevant only to accrual of benefits. Accordingly, both parties appear to agree ...


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