Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-12-05116/USCOURTS-caDC-12-05116-0/pdf.json

Parties Involved:
Pension Benefit Guaranty Corporation
Appellee
United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, AFL-CIO-CLC
Appellant

Document Text:

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.

USCA Case #12-5116 Document #1414653 Filed: 01/11/2013 Page 1 of 12
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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-ofservice 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.”

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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).

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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

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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

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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

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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

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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.

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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,

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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

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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.

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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.

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