United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued March 14, 2006 Decided May 2, 2006
No. 05-5165
CHARLES BOIVIN, ET AL.,
APPELLANTS
v.
U.S. AIRWAYS, INC., ET AL.,
APPELLEES
Appeal from the United States District Court
for the District of Columbia
(No. 03cv02373jr)
Sara R. Pikofsky argued the cause for appellants. With her
on the briefs was Sherwin Kaplan.
Garth D. Wilson, Attorney, Pension Benefit Guaranty
Corporation (PBGC), argued the cause for appellee PBGC.
With him on the brief were Jeffrey B. Cohen, Chief Counsel,
Nancy S. Heermans, Associate Chief Counsel, Paula J.
Connelly, Assistant Chief Counsel, and Beth A. Bangert, Jean
Marie Breen, and Sandra A. Garrick, Attorneys.
2
Before: HENDERSON and GARLAND, Circuit Judges, and
EDWARDS, Senior Circuit Judge.
Opinion for the Court filed by Circuit Judge GARLAND.
GARLAND, Circuit Judge: Retired U.S. Airways pilots
brought suit against the Pension Benefit Guaranty Corporation
(“PBGC” or “Corporation”), seeking to compel the PBGC to
correct alleged errors in its calculation of estimated benefits due
the pilots under the Employee Retirement Income Security Act
of 1974 (“ERISA”) and the U.S. Airways’ Pilots’ Retirement
Income Plan. The pilots contend that, in failing to correct those
errors, the PBGC breached its obligations both as fiduciary and
as agency-guarantor. Without reaching the merits, we conclude
that the claims against the PBGC must be dismissed because the
pilots have not yet exhausted their administrative remedies.
I
On August 11, 2002, U.S. Airways Group, Inc. and seven
subsidiaries (collectively, “U.S. Airways”) filed voluntary
petitions in the Bankruptcy Court for the Eastern District of
Virginia, seeking reorganization relief under Chapter 11 of the
Bankruptcy Code, 11 U.S.C. § 1101, et seq. On January 30,
2003, U.S. Airways filed with the PBGC a notice of its intent to
terminate its Pilots’ Retirement Income Plan, a defined-benefit
pension plan, citing “a serious funding shortfall.” In re U.S.
Airways Group, Inc., 296 B.R. 734, 738 (Bankr. E.D. Va. 2003).
U.S. Airways simultaneously filed a motion in the bankruptcy
court for the judicial findings required by ERISA to permit a
distress termination of the Plan. See 29 U.S.C. §
1341(c)(2)(B)(ii)(IV).
The bankruptcy court subsequently granted the motion,
finding that “unless the Plan is terminated, the debtors will be
3
unable to pay all of their debts pursuant to a plan of
reorganization and will be unable to continue in business outside
the chapter 11 reorganization process.” In re U.S. Airways
Group, Inc., No. 02-83984, Order at 1 (Bankr. E.D. Va. Mar. 2,
2003) (citing 29 U.S.C. § 1341(c)(2)(B)(ii)(IV)). After U.S.
Airways gained the consent of the pilots’ union to terminate the
Plan, see 29 U.S.C. § 1341(a)(3), the company entered into an
agreement with the PBGC setting March 31, 2003 as the Plan’s
termination date.
Prior to the termination date, U.S. Airways, as the pre-
termination plan administrator, was responsible for revising
benefit payments under the Plan from then-current levels to
what it estimated would be the amount of benefits that would be
covered by Plan assets or guaranteed by the PBGC following
termination. See 29 U.S.C. § 1341(c)(3)(D)(ii)(IV); 29 C.F.R.
§ 4041.42(c). Revised benefit calculations are governed by
ERISA and PBGC regulations. See 29 U.S.C. §§ 1322, 1344(a);
29 C.F.R. § 4022.61-.63. U.S. Airways completed these
determinations and informed Plan participants of their estimated
post-termination benefits by letters dated March 28, 2003. See
Boivin v. U.S. Airways, Inc., 297 F. Supp. 2d 110, 113 (D.D.C.
2003).
The PBGC -- created pursuant to Title IV of ERISA -- is a
U.S. government corporation within the Department of Labor
that insures private-sector defined-benefit pension plans. See 29
U.S.C. § 1302. Sponsors of such plans pay premiums to the
PBGC, and the Corporation acts as a statutory guarantor, paying
benefits to participants of underfunded terminated plans subject
to statutory limits. See id. §§ 1307, 1322. When an
underfunded plan is terminated, a successor trustee is appointed
to administer the plan and to assume responsibility for its assets.
ERISA permits, but does not require, the PBGC to be appointed
as the successor trustee. See id. § 1342(b). In practice, the
4
PBGC has always applied to serve as successor trustee for
distress-terminated defined-benefit plans, and the courts have
invariably granted its applications. See Pineiro v. PBGC, 318 F.
Supp. 2d 67, 72 (S.D.N.Y. 2003). Following this well-worn
path, the PBGC applied to serve as successor trustee of the U.S.
Airways Plan, and its application was granted.
When the U.S. Airways Plan terminated on March 31, 2003,
the PBGC began paying estimated benefits. At that point, the
PBGC had not yet made its formal determination of each
participant’s post-termination benefits, and it still has not done
so. The parties do not dispute that the PBGC normally requires
two to three years from the date it takes over a plan to issue a
formal benefit determination to each plan participant. See
Boivin, 297 F. Supp. 2d at 114; Decl. of Candace Campbell ¶ 15
(Nov. 24, 2003). Once final benefit determinations are made,
the PBGC either repays any shortfall in the amount of the
participants’ interim benefits, with interest, or seeks to recoup
any surplus. See 29 C.F.R. § 4022.81-.83.
On November 17, 2003, without waiting for the PBGC to
complete its final determinations, the plaintiffs filed suit against
the PBGC and U.S. Airways. The gravamen of their complaint
was that “the estimated benefit calculations [were] incorrectly
low as to them, and that waiting two to three years for a formal
benefit determination would cause them great hardship.”
Boivin, 297 F. Supp. 2d at 115. They alleged four primary
errors in the calculation of estimated benefits: (1) incorrect
determination of the effective date of an amendment to the U.S.
Airways Plan concerning early retirees; (2) improper
consideration of previously paid partial lump-sum benefits in
calculating prospective monthly annuities; (3) underpayment of
benefits to retirees over the age of 65, based upon the PBGC’s
statutory guaranty levels; and (4) underpayment of benefits to
other retirees, based on the “PBGC’s application of an
5
artificially low funding percentage in calculating benefits,”
Appellants’ Br. 2. The plaintiffs contended that the PBGC
breached its duties, both as a fiduciary and as a federal agency-
guarantor, by failing to correct the asserted errors in its
calculation of estimated benefits. See Am. Compl. ¶¶ 81-89.
The plaintiffs’ claims against U.S. Airways were stayed as
a consequence of the airline’s bankruptcy filing. See 11 U.S.C.
§ 362(a); Boivin v. U.S. Airways, Inc., No. 03-2373, Order at 1
(D.D.C. March 17, 2005). On December 19, 2003, the district
court denied a motion for a preliminary injunction against the
PBGC. In the months that followed, the PBGC took action to
remedy two of the four errors alleged by the pilots. First, it
corrected the benefit payments for retirees over the age of 65 by
increasing their benefits from 85 to 100 percent of their pre-
termination levels. Second, it corrected payments for other
retirees by raising their benefits from 85 to 98 percent of their
pre-termination levels. The PBGC took no action as to the other
two alleged errors.
On March 17, 2005, after hearing motions filed by both
sides, the district court issued an order granting summary
judgment for the PBGC on the plaintiffs’ fiduciary duty claims,
holding that there was no evidence that the Corporation had
breached any fiduciary obligation in calculating estimated
benefits. See Boivin v. U.S. Airways, Inc., No. 03-2373, Mem.
Op. at 3-4 (D.D.C. Mar. 17, 2005). It dismissed for failure to
state a claim the plaintiffs’ allegations against the PBGC as
agency-guarantor, on the ground that the plaintiffs had failed to
exhaust their administrative remedies. Id. at 4-5. At the
plaintiffs’ request, the court then entered final judgment
pursuant to Federal Rule of Civil Procedure 54(b).
6
II
As noted above, the pilots’ complaint alleged that the PBGC
had committed four errors in calculating their estimated benefits.
The pilots agree that the PBGC has since corrected two of those
errors -- relating to the percentage of payments made to retirees
-- and that only two alleged errors remain for our consideration
on this appeal: (1) incorrect determination of the effective date
of an amendment to the U.S. Airways Plan concerning early
retirees; and (2) improper consideration of previously paid
partial lump-sum benefits in calculating prospective monthly
annuities. See Appellants’ Br. 2, 5-7; Reply Br. 19.
The first remaining allegation concerns benefit reductions
made by the PBGC based on its view that an amendment to the
Plan, which enhanced benefits for certain early retirees, had
become effective less than 60 months before the Plan
terminated. ERISA provides that amendments “resulting from
a plan amendment which was made, or became effective,
whichever is later,” less than 60 months before termination may
not be fully credited. 29 U.S.C. § 1322(b)(1)(B).1 The parties
1
ERISA § 4022(b)(1) states:
Except to the extent provided in paragraph 7,
....
(B) any increase in the amount of benefits under a plan
resulting from a plan amendment which was made, or
became effective, whichever is later, within the 60
months before the date on which the plan terminates
shall be disregarded.
29 U.S.C. § 1322(b)(1). The referenced exception, ERISA §
4022(b)(7), provides:
Benefits described in paragraph (1) are guaranteed only to
7
appear to agree that the amendment at issue here was “made” on
December 4, 1997, the date it was adopted. See Appellants’ Br.
30; PBGC’s Opp’n to Pl.’s Supplemental Mem. in Supp. of its
Mot. for Partial Summ. J. at 5. The dispute, therefore, is over
when the amendment “became effective.”
The plaintiffs contend that, because correspondence setting
forth the amendment stated that U.S. Airways would offer the
enhancement “effective as of the effective date of the new
Collective Bargaining Agreement” with the pilots’ union, Early
Retirement Incentive Program, J.A. at 107, and because the
Agreement became effective on January 1, 1998, that date is the
operative date. They further contend that, because January 1,
1998 was more than 60 months before the Plan was terminated,
no reduction in benefits is appropriate. The PBGC, by contrast,
has preliminarily concluded that the amendment did not become
effective until May 1, 1998 -- less than 60 months before
termination -- because that was the date specified in the
correspondence as the first date upon which a participant could
retire and receive the enhanced benefit. See id. at 107-08. The
plaintiffs argue that the PBGC’s position misconstrues the
statutory phrase “became effective,” 29 U.S.C. § 1322(b)(1), as
the extent of the greater of --
(A) 20 percent of the amount which, but for the fact
that the plan or amendment has not been in effect for
60 months or more, would be guaranteed under this
section, or
(B) $20 per month,
multiplied by the number of years (but not more than 5) the
amendment . . . has been in effect.
Id. § 1322(b)(7).
8
well as the related regulatory phrase “has been in effect,” 29
C.F.R. § 4022.25(b).2
The second alleged error concerns pilots who, prior to the
Plan’s termination, had taken a portion of their pension benefits
as a lump sum, with the remainder to be paid out in monthly
installments. The PBGC treated the partial lump sum as if it
amounted to the purchase of a partial annuity, also to be paid out
prospectively. The PBGC then applied the statutory guarantee
limit against the total payments to the participant, including the
portion taken as a lump sum.3 In so doing, the plaintiffs allege,
the PBGC misinterpreted its own regulations by making
calculations on the basis of benefits “paid” rather than benefits
“payable” as of the termination date. See 29 C.F.R. § 4022.22
(referring to “benefits payable”); id. § 4022.62 (same).
As this discussion indicates, both errors alleged by the
pilots depend, at bottom, upon interpretations of ERISA sections
and PBGC regulations. The pilots assert that the PBGC
misinterpreted the relevant statutory and regulatory provisions,
and in so doing breached both its fiduciary duty as trustee and
its responsibility as agency-guarantor. See Appellants’ Br. 8
(citing 29 U.S.C. §§ 1132, 1303(f)). The PBGC responds in
2
See 29 C.F.R. § 4022.25(b) (providing that the percentage of a
“benefit increase” guaranteed by the PBGC is determined, inter alia,
by multiplying twenty percent by the number of years (not to exceed
five) that “the benefit increase has been in effect”).
3
If the participant’s total payments were greater than the
applicable guarantee limit, the PBGC reduced the remainder annuity
to zero because, in its view, the retiree had already received more than
he was due by virtue of the partial lump sum “annuity.” See Mem. in
Supp. of the PBGC’s Cross-Mot. for Summ. J. at 29.
9
three ways. First, it argues that, in calculating estimated
benefits, it owes no fiduciary duty to the pilots because it makes
such calculations in its role as agency-guarantor and not as a
fiduciary. Second, the PBGC asserts that -- even if it did act as
a fiduciary in making the challenged calculations (and even if
the calculations were wrong) -- it did not breach a duty to the
pilots because it made the calculations in good faith. Third, the
PBGC maintains that, regardless of the capacity in which it
acted and regardless of whether its calculations violated a
fiduciary duty or agency responsibility, the pilots have not
exhausted their administrative remedies and must do so before
seeking judicial review. That administrative process requires
the plaintiffs to wait until the PBGC completes its work and
issues formal benefit determinations, at which point the
plaintiffs must complete internal PBGC appeals before filing an
action in federal court.
For the reasons set forth below, we agree with the PBGC’s
exhaustion argument. The pilots must await formal
determinations, and then challenge those determinations through
the procedures that the PBGC has provided, before they may
seek redress in court. Since our holding regarding exhaustion
resolves the case, we need not reach any questions concerning
the existence or scope of the PBGC’s fiduciary duty.
III
Although ERISA does not expressly require exhaustion of
administrative remedies,4 “where Congress has not clearly
required exhaustion, sound judicial discretion governs.”
4
Nor does it expressly condition judicial review upon “final”
agency action. The two ERISA provisions that the plaintiffs assert
authorize their suit are 29 U.S.C. §§ 1132(a) and 1303(f); the plaintiffs
do not rely on the Administrative Procedure Act, 5 U.S.C. § 704.
10
McCarthy v. Madigan, 503 U.S. 140, 144 (1992); see
Communications Workers of Am. v. AT&T, 40 F.3d 426, 432
(D.C. Cir. 1994). And as the plaintiffs correctly concede,
“[c]ourts generally hesitate to interfere in matters prior to final
agency action in order to allow the expert agency to complete its
work and to allow senior officials to authoritatively rule on
issues.” Appellants’ Br. 34.5 Indeed, this court has held that, in
the case of ongoing pension plans, “barring exceptional
circumstances, parties aggrieved by decisions of pension plan
administrators must exhaust the administrative remedies
available to them under their pension plans before challenging
those decisions in court” under ERISA. Communications
Workers, 40 F.3d at 428.
1. The PBGC has promulgated regulations providing
administrative remedies for persons dissatisfied with its benefit
determinations. As discussed in Part I, when an underfunded
plan terminates, the PBGC begins paying estimated benefits to
plan participants. After completing a review of plan documents,
data, and assets, the Corporation issues benefit determination
letters to participants setting forth its formal calculation of their
benefits. The regulations refer to such a formal determination
as an “initial determination,” and they require that it “shall be in
writing, shall state the reason for the determination, and . . . shall
contain notice of the right to request review of the
determination.” 29 C.F.R. § 4003.21. “Any person aggrieved
by” such “an initial determination” may file an appeal to the
5
See McCarthy, 503 U.S. at 144-45 (“This Court long has
acknowledged the general rule that parties exhaust prescribed
administrative remedies before seeking relief from the federal
courts.”); Myers v. Bethlehem Shipbldg. Corp., 303 U.S. 41, 50-51
(1938) (noting “the long-settled rule of judicial administration that no
one is entitled to judicial relief for a supposed or threatened injury
until the prescribed administrative remedy has been exhausted”).
11
PBGC Appeals Board. See id. § 4003.51.6 The decision of the
Appeals Board “constitutes the final agency action by the PBGC
with respect to the determination which was the subject of the
appeal.” Id. § 4003.59(b). The regulations further state that “a
person aggrieved by an initial determination . . . has not
exhausted his or her administrative remedies until he or she has
filed” such a request for review. Id. § 4003.7.
The pilots contend that these administrative remedies were
not intended to apply to their situation. As both sides agree, to
date the pilots have received only estimated determinations and
have not yet received the formal “initial determination” to which
the regulations refer. Because the “regulations remain silent on
exhaustion of claims against PBGC for actions other than final
determination of benefits,” the pilots contend that the
regulations “do not preclude” their claims. Reply Br. 15.
The PBGC, to whose interpretation of its own regulations
we owe substantial deference, see Thomas Jefferson Univ. v.
Shalala, 512 U.S. 504, 512 (1994), persuasively argues to the
contrary. The Corporation insists that, although the exhaustion
regulations do not mention estimated benefit determinations,
they are part of a process that begins with such determinations,
leads to formal determinations, and culminates in intra-agency
appeals generating “final agency actions.” It would make little
sense, the PBGC observes, to establish an elaborate process for
appealing determinations (and requiring the exhaustion of such
appeals) once the Corporation reaches a formal conclusion, but
6
An aggrieved person may alternatively request reconsideration
by “the Director of the department within the PBGC that issued the
initial determination.” 29 C.F.R. § 4003.33. The filing of either an
appeal or a request for reconsideration “shall automatically stay the
effectiveness of a determination” until the PBGC issues a decision. Id.
§ 4003.22(a).
12
to allow plan participants to pretermit that process by going to
court before that stage is even reached.
In any event, regardless of whether the regulations’ authors
consciously accounted for the possibility that a participant might
want to challenge an estimated determination, there is no
question that the regulations provide an administrative avenue
for doing so: An estimated determination inevitably leads to a
formal benefit determination, and, if the latter does not satisfy
the participant, the regulations provide for an administrative
appeal. If the participant wins that appeal, he or she is entitled
to recoup any underpayments along the way, with interest. See
29 C.F.R. § 4022.81-.83; Appellee’s Br. 14.
2. The Supreme Court has explained that courts generally
require administrative exhaustion “because it serves the twin
purposes of protecting administrative agency authority and
promoting judicial efficiency.” McCarthy, 503 U.S. at 145.
With respect to agency authority, “the exhaustion doctrine
recognizes . . . that agencies, not the courts, ought to have
primary responsibility for the programs that Congress has
charged them to administer.” Id. The doctrine “acknowledges
the commonsense notion[s] of dispute resolution that an agency
ought to have an opportunity to correct its own mistakes
[regarding] the programs it administers before it is haled into
federal court,” id., and that “‘frequent and deliberate flouting of
administrative processes’ could weaken an agency’s
effectiveness by encouraging disregard of its procedures,” id.
(quoting McKart v. United States, 395 U.S. 185, 195 (1969)).
With respect to judicial efficiency, by giving an agency the
opportunity “to correct its own errors, a judicial controversy
may well be mooted, or at least piecemeal appeals may be
avoided.” Id. “And even where a controversy survives
administrative review, exhaustion of the administrative
procedure may produce a useful record for subsequent judicial
13
consideration, especially in a complex or technical factual
context.” Id.
The purposes identified by the Court are well served by
enforcing an exhaustion requirement in this case.7 Exhaustion
would protect the PBGC’s authority to administer the complex
program that Congress has entrusted to its care, give it the
chance to correct its own mistakes, and obviate what would
otherwise be an incentive to disregard -- and to disrupt -- the
PBGC’s administrative procedures. Indeed, allowing the pilots
to proceed in court at this time would permit them to jump ahead
of others who have patiently waited for the PBGC to reach final
determinations -- which would no doubt encourage those others
to file suit as well, disrupting the entire process and ultimately
delaying determinations for everyone. Requiring exhaustion
would also promote judicial efficiency by giving the PBGC the
opportunity to moot this appeal by correcting the errors alleged
by the pilots; it would at least require the pilots to consolidate in
one appeal any objections they may have to the Corporation’s
final as well as estimated calculations. See McKart, 395 U.S. at
194 (noting that “it is generally more efficient for the
administrative process to go forward without interruption than
it is to permit the parties to seek aid from the courts at various
intermediate stages”).
7
Cf. Communications Workers, 40 F.3d at 432 (noting that “the
exhaustion requirement enables plan administrators to apply their
expertise and exercise their discretion to manage the plan’s funds,
correct errors, make considered interpretations of plan provisions, and
assemble a factual record that will assist the court reviewing the
administrators’ actions”).
14
The pilots contend that the usual considerations counseling
in favor of exhaustion are less applicable here because their
claims -- that the PBGC has misconstrued the applicable statutes
and regulations -- present pure questions of law. Since those
claims do not involve factual determinations, the pilots argue,
requiring exhaustion will not produce an administrative record
that will be of any assistance to the court.
We disagree. The pilots concede that the PBGC’s
interpretations of the relevant statutory and regulatory
provisions are entitled to judicial deference, and that we must
uphold them if they are reasonable. See Reply Br. 17
(“Appellants simply request that PBGC adopt a reasonable
interpretation of the statute, regulations and plan documents.”);
Oral Arg. Tape at 1:02:13; see generally Chevron U.S.A. Inc. v.
Natural Res. Def. Council, Inc., 467 U.S. 837 (1984). But in
order to evaluate the reasonableness of the PBGC’s
constructions, we need a record explaining the reasons for those
constructions. At present, we have only estimated benefit
calculations, with no formal explanation of their rationale.
Requiring exhaustion will generate the necessary record. See 29
C.F.R. § 4003.59(c) (providing that the “decision of the Appeals
Board shall be in writing, specify the relief granted, if any, [and]
state the bases for the decision, including a brief statement of the
facts or legal conclusions supporting the decision”).8 Equally
important, it will provide an authoritative statement of the
agency’s position by its senior officials.
An analogous situation was at issue in Communications
Workers. See 40 F.3d at 433. There, former AT&T employees
sued the administrators of the (ongoing) AT&T pension plan
8
See McCarthy, 503 U.S. at 145 (recognizing that “exhaustion of
the administrative procedure may produce a useful record for
subsequent judicial consideration”).
15
pursuant to ERISA, claiming that the administrators’ decision
deeming them ineligible for certain benefits violated (inter alia)
the terms of the plan. In concluding that the plaintiffs were first
required to exhaust their administrative remedies by appealing
the administrators’ decision to the plan’s benefits committee, we
relied in part on the fact that the standard of review of the
administrators’ construction of the plan’s terms was abuse of
discretion.9 That standard made it “important for the plan to
provide a final, fully considered, and reasoned explanation for
the court to evaluate.” Id. But because the “Benefits Committee
. . . never rendered a final determination, and thus never
provided a fully reasoned explanation for such a decision, the
District Court had nothing before it, except the arguments of
counsel, to which it could defer.” Id. “By permitting appellees’
ERISA claim to proceed before obtaining a final decision from
the Plan, the District Court left itself unable to apply properly
the . . . rule of deference.” Id. Were we to permit the pilots’
claims to proceed here, we would face a similar disability.10
9
We explained that “‘a denial of benefits challenged under
[section 502 of ERISA] is to be reviewed under a de novo standard
unless the benefit plan gives the administrator . . . discretionary
authority to determine eligibility for benefits or to construe the terms
of the plan,’ in which case courts apply an abuse-of-discretion
standard,” Communications Workers, 40 F.3d at 433 (quoting
Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989))
(emphasis added in Communications Workers), and that the AT&T
“pension administrator ha[d] discretionary authority to construe the
terms of the plan and determine eligibility,” id.
10
We note that, in McKart v. United States, the Supreme Court
held that a defendant’s failure to exhaust administrative remedies did
not preclude him from asserting the invalidity of his Selective Service
Act classification as a defense to prosecution for failing to report for
induction into the armed forces. 395 U.S. at 196-201. Although there
were multiple factors counseling against requiring exhaustion in that
16
3. Finally, the pilots point out that courts have recognized
certain circumstances “in which the interests of the individual
[plaintiff] weigh heavily against requiring administrative
exhaustion.” McCarthy, 503 U.S. at 146. They assert that two
such circumstances are relevant here.
First, the pilots argue that they should be excused from
exhausting administrative remedies because the PBGC has
already predetermined the questions at issue. In particular, the
pilots note, the PBGC has stated “that its position on calculating
annuities for recipients of partial lump sum payments is
longstanding.” Appellants’ Br. 34. Accordingly, an
administrative appeal would be futile and should not be
required. Id.
We reject this argument. The “‘futility exception is . . .
quite restricted,’” Communications Workers, 40 F.3d at 432
(quoting Committee of Blind Vendors of the District of
Columbia v. District of Columbia, 28 F.3d 130, 133 n.5 (D.C.
Cir. 1994)), and “has been applied only when resort to
administrative remedies is ‘clearly useless,’” id. (quoting
Randolph-Sheppard Vendors of Am. v. Weinberger, 795 F.2d 90,
105 (D.C. Cir. 1986)). In order to come within its terms,
plaintiffs “must show that it is certain that their claim will be
case, see id., the Court did find persuasive the fact that the issue was
“solely one of statutory interpretation,” id. at 197-98. In that pre-
Chevron case, however, the Court stated that “judicial review would
not be significantly aided” by having the Selective Service System’s
interpretation of the statute because “the proper interpretation [was]
certainly not a matter of [agency] discretion” to which the Court
would have to defer. Id. at 198-99. Here, the plaintiffs concede that
deference to a reasonable agency interpretation is required.
17
denied on appeal, not merely that they doubt an appeal will
result in a different decision.” Id. (internal quotation marks
omitted). In Communications Workers, we rejected a similar
argument contending that appeal to the pension plan’s benefits
committee would be futile because plan administrators had
consistently interpreted the plan to deny the kinds of claims
sought by plaintiffs. See id. at 432-33. “Even if one were to
concede that an unfavorable decision from the Benefits
Committee was highly likely,” we said, “that does not satisfy our
strict futility standard requiring a certainty of an adverse
decision.” Id. at 433.
The PBGC’s actions to date belie the pilots’ concerns.
Even the pilots concede that the PBGC has corrected two of the
four errors they initially alleged. See supra Part II; Appellants’
Br. 2, 6-7. It is difficult to argue persuasively that appeals to the
PBGC are futile when the Corporation has already reversed
course and remedied half of the plaintiffs’ complaints.
Moreover, that reversal took place without the involvement of
the PBGC Appeals Board, which -- as far as the record reflects
-- has not yet taken a position on the remaining two questions of
statutory and regulatory construction. Plaintiffs have thus failed
to meet their heavy burden of showing that a request for relief
to the Appeals Board would be futile.
Second, the pilots observe that courts do not require
exhaustion of administrative remedies where “a particular
plaintiff may suffer irreparable harm if unable to secure
immediate judicial consideration of his claim.” McCarthy, 503
U.S. at 147. “Each day that PBGC delays in calculating
estimated benefits,” the pilots contend, “results in prejudice to
plaintiffs.” Appellants’ Br. 33. “For every month that retirees
have to wait for PBGC to correct its erroneous benefit
calculations, the retirees have to figure out what sacrifices in
18
their standard of living they must make to continue to support
themselves on an unexpectedly diminished pension.” Id. at 7.
Like the district court, we do “not doubt that the reduction
of plaintiffs’ benefits has caused them financial hardship,
particularly in light of the fact that the plaintiffs are all retirees.”
Boivin, 297 F. Supp. 2d at 118. But we cannot conclude that
such a temporary (if later proven erroneous) reduction warrants
exemption from the generally applicable requirement of
exhaustion. It certainly does not constitute “irreparable harm,”
McCarthy, 503 U.S. at 147, since the PBGC’s regulations
provide that, if it is subsequently determined that a beneficiary
in a terminated plan has been underpaid, the beneficiary will
receive reimbursement of the underpaid amount, plus interest,
see 29 C.F.R. § 4022.81-.83; Appellee’s Br. 14.
We stress that this resolution does not sentence the plaintiffs
to an interminable wait for their final benefit determinations. As
the Court warned in McCarthy, exhaustion may be excused
where “prejudice . . . result[s] . . . from an unreasonable or
indefinite timeframe for administrative action.” 503 U.S. at 147.
And the PBGC itself concedes that, if it takes too long to make
a final determination, the plaintiffs may bring suit under the
Administrative Procedure Act to “compel agency action
unlawfully withheld or unreasonably delayed.” 5 U.S.C. §
706(1); see Appellee’s Br. 16; Oral Arg. Tape at 52:32.
We have not, however, reached that point. The PBGC’s
stated goal is to issue benefit determinations within three years
of a plan’s termination date. See Campbell Decl. ¶ 15.
Although it has not achieved that goal in this case, the PBGC
represented at oral argument that it expected to come close to
the three-year mark by completing the pilots’ final benefit
determinations within the next few months. See Oral Arg. Tape
at 49:29. We have no reason to doubt that representation. That
19
said, if the PBGC fails to complete the formal benefit
determinations within a reasonable time period, the appellants
may bring suit under the Administrative Procedure Act to
compel agency action. See Telecommunications Research &
Action Ctr. v. FCC, 750 F.2d 70 (D.C. Cir. 1984); see also
McCarthy, 503 U.S. at 147 (noting that a “claimant ‘is not
required indefinitely to await a decision of [an administrative]
tribunal before applying to a federal court for equitable relief’”
(quoting Smith v. Illinois Bell Tel. Co., 270 U.S. 587, 591-92
(1926)).
4. In sum, we conclude that the plaintiffs’ claims against
the PBGC must be dismissed because they have failed to
exhaust their administrative remedies. Our ruling is limited to
the facts of this case: a challenge to benefit calculations, where
the dispute is over the meaning of statutory and regulatory
terms, and where the construction of those terms has not yet
been definitively established by either the courts or the PBGC.
Under these circumstances, we hold that plaintiffs must exhaust
administrative remedies before they may seek judicial
intervention.
IV
The district court’s grant of partial summary judgment for
the PBGC is vacated, and the case is remanded to that court with
instructions to dismiss the pilots’ claims against the PBGC,
without prejudice, for failure to exhaust administrative remedies.
So ordered.