PINEIRO v. PENSION BENEFIT GUARANTY CORP., (S.D.N.Y. 2000)

LORETTA A. PRESKA, United States District Judge

Plaintiffs Al Pineiro, Richard Brooks and Leonard Beaumont, former employees of Pan American Airways, Inc. and participants in the Pan American World Airways, Inc. Cooperative Retirement Income Plan (the "Plan") brought this action on behalf of themselves, the Plan and all others similarly situated seeking equitable relief against defendant Pension Benefit Guaranty Corporation ("PBGC") for fiduciary violations of ERISA. PBGC moved for dismissal of the complaint under rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure. In a November 1997 opinion, Pineiro v. Pension Benefit Guar. Corp., No. 96 Civ. 7392, 1997 WL 739581 (S.D.N.Y. Nov. 26, 1997) ("Pineiro I"), defendant's motion to dismiss was granted in part and denied in part. In particular, I dismissed plaintiffs' claim for breach of fiduciary duty because I interpreted ERISA to leave the determination of guaranteed benefits of Plan participants to the PBGC in its capacity as guarantor, rather than statutory trustee.

On April 7, 1999, after reviewing the Amended Complaint, a "fresh look" at the statute prompted me to deny defendant's second motion to dismiss as premature and hold that ERISA does not preclude the statutory trustee from determining guaranteed benefits. See Pineiro v. Pension Benefit Guar. Corp., No. 96 Civ. 7392, 1999 WL 195131, at *2 (S.D.N.Y. Apr. 7, 1999) ("Pineiro II"). Thus, I stated, "it no longer `appears beyond doubt that the plaintiff can prove no set of facts in support of his claim that would entitle him to relief.'" Id. (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102 (1957)).

Before me now is PBGC's renewed motion to dismiss the Amended Complaint. PBGC argues that plaintiffs' claims for fiduciary breach must fail because PBGC is not a fiduciary when it (a) determines benefits under Title IV of ERISA; (b) expends trust funds for costs of calculating benefits; (c) handles appeals of PBGC decisions; and (d) fails to provide information to plaintiffs and requires compliance with the Freedom of Information Act ("FOIA"). PBGC also argues that PBGC's different treatment of participants in another of Pan Am's plans and its failure to timely submit "initial determination letters" ("IDLs") to Plan participants do not provide bases for claims of breach of fiduciary duty and that PBGC, as trustee, has no duty to advocate for plan participants.

DISCUSSION

I. Legal Standard

In deciding a motion to dismiss, I must view the complaint in the light most favorable to the plaintiff. Yoder v. Orthomolecular Nutrition Inst., Inc., 751 F.2d 555, 562 (2d Cir. 1985). I must accept as true the factual allegations stated in the complaint,Zinermon v. Burch, 494 U.S. 113, 118 (1990), and draw all reasonable inferences in favor of the plaintiff, see Haines v. Kerner, 404 U.S. 519, 520-21 (1972); Hertz Corp. v. City of New York, 1 F.3d 121, 125 (2d Cir. 1993). A motion to dismiss may be granted only if it appears beyond doubt that the plaintiff can prove no set of facts in support of a claim which would entitle the plaintiff to relief.Conley, 355 U.S. at 45-46, 78 S.Ct. at 102.

II. Analysis.

A. PBGC's Fiduciary Status.

1. Determination of Benefits.

PBGC argues that when it determines guaranteed benefits, it acts in its capacity as guarantor and not as statutory trustee. Thus, PBGC argues, with respect to benefit calculation, it owes no fiduciary duty to plan participants. Plaintiffs contend that a reading of the relevant statutes compels a different result.

PBGC's renewed arguments do not persuade me to modify my holding in Pineiro II that 29 U.S.C. § 1346 "does not expressly forbid the trustee from calculating benefits." Pineiro II, at *2. Reading 29 U.S.C. § 1322, 1346 and 1361 together, as PBGC urges me to do, reinforces my conclusion. Section 1322 provides that PBGC "shall guarantee, in accordance with this section, the payment of all nonforfeitable benefits . . . under a single-employer plan which terminates at a time when this subchapter applies to it." 29 U.S.C. § 1322. While section 1322 provides some exceptions to or limits on the amount of the guarantee, it does not expressly provide that PBGC is the authoritative calculator, with one exception. This single exception can be found in section 1322(c), a section entitled "Payment by [PBGC] to participants and beneficiaries of recovery percentage of outstanding amount of benefit liabilities." Id. § 1322(c). Section 1322(c)(4) states, "Determinations under this subsection shall be made by the [PBGC]. Such determinations shall be binding unless shown by clear and convincing evidence to be unreasonable." Id. § 1322(c)(4). The absence of such a clear statement of the entity responsible for calculating benefits in the remainder of section 1322 is troubling to PBGC's argument that Congress intended that PBGC should be the sole entity responsible for guaranteed benefit calculation.

Defendant cites Caskey v. Pension Benefit Guar. Corp., No. 97-CV-4240 (E.D.Pa. Jan. 14, 1999), aff'd on other grounds, No. 99-1090 (3d Cir. Nov. 26, 1999), to support its position that PBGC calculates benefits in its guarantor role. In holding that the PBGC is not a trustee when it calculates benefits, the Caskey district court cited only Pineiro I. See Caskey, at 9. As an additional ground for granting PBGC's summary judgment motion, the Caskey court held that even if PBGC was a fiduciary when it calculated benefits, PBGC did not violate the duty under the circumstances presented. Caskey, thus, holds little weight here.
Also, I do not find ERISA's legislative history to be inconsistent with my holding. It is clear from the language of section 1346 that Congress intended PBGC to furnish the trustee with reports regarding various computations. See 29 U.S.C. § 1346 (entitled "Reports to trustee"). What is not clear from the statutory language or legislative history is defendant's argument that Congress intended topreclude the trustee from calculating benefits using the reports provided by PBGC.

I note that if it is ultimately determined that PBGC determines benefits in its guarantor capacity, PBGC will not be liable for certain uses of trust fund assets under 29 U.S.C. § 1342(a).

29 U.S.C. § 1342(a) reads:

Notwithstanding any other provision of this subchapter, the corporation is authorized to pool assets of terminated plans for purposes of administration, investment, payment of liabilities of all such terminated plans, and such other purposes as it determines to be appropriate in the administration of this subchapter.

29 U.S.C. § 1342(a) (emphasis added). In essence, even if fiduciary duties attached to PBGC under 29 U.S.C. § 1342(d)(3), PBGC is entitled to pool terminated plan assets in accordance with 29 U.S.C. § 1342(a) notwithstanding its fiduciary duties. Therefore, a cause of action for breach of fiduciary duty cannot lie against PBGC for its actions taken in accordance with 29 U.S.C. § 1342(a).

2. Trustee's Role as Advocate.

Plaintiffs argue that PBGC as trustee has a duty to "vindicate the rights of Plan participants by vigilantly monitoring `PBGC as Guarantor.'" Pineiro I, at *12. Defendant contends that ERISA does not establish a structure in which the statutory trustee is an advocate for plan participants.

In considering these issues in Pineiro I, I relied heavily on the District of Columbia Circuit's decision in Piech v. Pension Benefit Guar. Corp., 744 F.2d 156 (1984). I determined that Piech and the statutory scheme discussed therein demonstrated that "Congress did not provide for the sort of trustee/advocate that plaintiffs seek." Pineiro I, at *11. An analysis of the ERISA sections upon which the Piech court relied compels me to vacate that part of Pineiro I and hold that 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.

As discussed in Pineiro I, the Piech court relied on three sections of ERISA in reaching its determination that "Congress did not contemplate that plan trustees would undertake the task of testing the legal merits of participants' claims against the PBGC as guarantor." Piech, 744 F.2d at 162.

First, Congress has provided that "the [PBGC] may request that it be appointed as trustee of a plan in any case," without limiting that power in cases in which PBGC regulations or policy result in the denial of guaranteed benefits to some participants. 29 U.S.C. § 1342(b). Furthermore, Congress has sharply limited the power of any trustee to advocate the interests of the plan participants in a manner adverse to the PBGC. Thus, a trustee has the power "to commence, prosecute, or defend on behalf of the plan any suit or proceeding involving the plan, except to the extent that the [PBGC] is an adverse party in a suit or proceeding." 29 U.S.C. § 1342(d)(1)(B)(iv) (emphasis added). On the other hand, the statute permits "any participant, beneficiary, plan administrator or employee adversely affected by any action of the PBGC" to bring suit against the agency in federal court. 29 U.S.C. § 1303(f).

Id.

Subsequent to the Piech decision, and perhaps upon the express invitation of the Piech court, see id. at 162, Congress amended two of the referenced ERISA sections. These amendments (a) broadened the category of those permitted to sue the PBGC,see 29 U.S.C. § 1303(f)(1) (as amended) (adding "fiduciary" to list of those permitted to bring suit against PBGC) and (b) eliminated the prohibition on the trustee of bringing suit against the PBGC, see 29 U.S.C. § 1342(d)(1)(B)(iv) (as amended) (permitting trustee "to commence, prosecute or defend on behalf of the plan any suit or proceeding involving the plan").

These amendments indicate a legislative intent to allow plan trustees to sue the PBGC. While Congress has authorized the appointment of the PBGC "in any case," I cannot say as a matter of law that PBGC could not be sued for breach of fiduciary duty given the statutory modifications. As I noted in Pineiro I, under the prior statutory scheme, such an interpretation could place PBGC in "the untenable position of having to sue itself."Pineiro I, at *19 n. 17. A solution to the difficulty presented by this prospect is a task for the legislature. Thus, defendant's motion to dismiss plaintiff's claim for breach of fiduciary duty premised on PBGC's alleged conflict of interest is denied.

While plaintiffs argue for the "trustee/advocate" role in their brief, their Amended Complaint states that "the statutory trustee has no standing under ERISA to bring legal action against the PBGC in its capacity as `guarantor.'" (Am. Compl. ¶ 59.) Plaintiffs are given leave to replead this paragraph within ten days of the date of this order.

3. PBGC's Appellate Function and Treatment of Participants in Other Plans.

Plaintiffs' allegations regarding various failings of the PBGC appeals process do not state a claim for fiduciary breach. In providing a mechanism for administrative review, the PBGC acts in its governmental role and not as a plan fiduciary.

Plaintiffs' allegations regarding PBGC's different treatment afforded to participants in the Pan Am pilots' pension plan are also insufficient to state a claim for fiduciary breach. Plaintiffs contend that merely treating the pilots "more favorably" establishes a claim; however, plaintiffs' case citations do not support such an interpretation. While "discrimination `constitutes a fiduciary breach for purposes of ERISA,'" Rovira v. ATT, 817 F. Supp. 1062, 1072 (S.D.N.Y. 1993) (quoting Pallas v. Pacific Bell, 940 F.2d 1324, 1321 (9th Cir. 1991)), plaintiffs have cited no cases showing that differential treatment, absent discrimination, would establish a claim for fiduciary breach. Thus, plaintiffs' claim for fiduciary breach premised on alleged differential treatment of the pilots, under the circumstances alleged here, must fail.

4. PBGC's Information Disclosure.

Plaintiffs contend that PBGC has a fiduciary obligation to provide summary plan descriptions and summary annual reports. As stated inPineiro I, at *16, "[T]he statute as enacted by Congress does not contemplate that anyone other than an `administrator' or `plan sponsor' provide the regular audited disclosure that plan administrators must provide."

With respect to the application of the Freedom of Information Act ("FOIA") to plaintiffs' requests for information concerning IDLs, plaintiffs have stated a claim for breach of its statutory duty of disclosure and fiduciary duty. 11 U.S.C. § 704 obligates a trustee to "furnish such information concerning the estate and the estate's administration as is requested by a party in interest." This duty exists whether the trustee is PBGC or another entity.

The purpose of FOIA is to give the public broader access to agency documents. See GTE Sylvania, Inc. v. Consumers Union of U.S., Inc., 445 U.S. 375, 385, 100 S.Ct. 1194, 1201 (1980). While FOIA is fundamentally designed to inform the public about agency action, and not to benefit private litigants,see N.L.R.B. v. Sears, Roebuck Co., 421 U.S. 132, 144 n. 10, 95 S.Ct. 1504, 1513 n. 10 (1975), nothing in the statutory scheme indicates that FOIA is intended to hinder access to information to which a private person would otherwise be entitled.

Here, by operation of 29 U.S.C. § 1342, 11 U.S.C. § 704 requires an ERISA trustee to furnish information to a plan participant upon request. There is no reason why access to such information should be made more burdensome to a plan participant for the sole reason that the trustee happens to be the PBGC. PBGC is obligated to provide such information in its capacity as trustee. Therefore, PBGC's imposition of the additional requirements of FOIA on plaintiffs' requests for IDL information under 11 U.S.C. § 704 forms the basis for a claim of breach of fiduciary duty.

This holding does not vitiate my prior determination inPineiro I regarding the exhaustion of administrative remedies where plaintiffs choose to make requests of PBGC under FOIA.

Plaintiffs' allegations regarding PBGC's fraudulent misrepresentations regarding benefits and IDLs do not state a claim for fiduciary breach as pleaded. Defendant argues that even if the misrepresentations were properly pleaded, no claim for fiduciary breach may lie because "[n]o ERISA fiduciary duty exists to inform participants when benefit determinations would be made." (Def.'s Mem. at 16-17.) To support its proposition, defendant cites Gruby v. Brady, 838 F. Supp. 820, 832 (S.D.N Y 1993). Gruby dismissed claims against a fund administrator for failure to furnish documents because such documents were not specified in 29 U.S.C. § 1024(b)(4), the ERISA section requiring the provision of particular documents to participants. In addition, Gruby dismissed claims against the plan trustees for failure to provide information, noting that plaintiffs had failed to establish that the requested information was within the scope of ERISA's disclosure provisions.

First, the trustee's disclosure obligations are not as particularized as are those of the plan administrator. See 11 U.S.C. § 704 ("The trustee shall — . . . furnish such information concerning the [plan] and the [plan's] administration as is requested by a party in interest") (referred to in 29 U.S.C. § 1342). Second, here, plaintiffs allege that PBGC made misrepresentations in addition to those relating to timing of IDL issuance. (SeeAm. rCompl. ¶ 4 (PBGC "made knowingly false statements to the Plaintiffs regarding their benefits"), 22 (PBGC "misrepresent[ed] . . . facts regarding issuance of the IDLS to plan participants"), 42 (PBGC "misrepresented the status of individual benefit determinations").) Thus, even if defendant is correct that no duty exists to inform plaintiffs of when IDLs will be issued, defendant provides no support for its argument that other information regarding benefits and IDLs is outside a trustee's realm of obligatory disclosure. Here, the information sought by plaintiffs concerning IDLs and benefits could fall within the trustee's penumbra.

Despite this, plaintiffs' fraud claims are dismissed because they do not contain the requisite particularity described in Rule 9(b) of the Federal Rules of Civil Procedure. See Acito v. IMCERA Group, Inc., 47 F.3d 47, 51 (2d Cir. 1995) ("the complaint must (1) specify the statements that the plaintiff contends were fraudulent; (2) identify the speaker; (3) state where and when the statements were made, and (4) explain why the statements were fraudulent"). The Amended Complaint refers to defendant's alleged misrepresentations in vague language. (See Am. Compl. ¶ 4, 22, 42.)

5. Compelling Agency Action.

In Pineiro I, I noted that, "An excessive delay in making such benefit determinations, or an outright failure to make such determinations, may give rise under 29 U.S.C. § 1303(f) to a cause of action by an aggrieved participant against PBGC in its guarantor capacity." Pineiro I, at *19 n. 16. Such an action, I held, would be governed by the Administrative Procedures Act, 5 U.S.C. § 706(1). Id.

The gravamen of plaintiffs' complaint is that PBGC, acting in its capacity as trustee, failed to make benefit determinations and issue IDLs in a timely manner. An action against PBGC as trustee does not lie under 29 U.S.C. § 1303(f). Thus, plaintiffs' claims are dismissed insofar as they apply to PBGC in its trustee capacity.

If, however, it is ultimately proved that PBGC issues IDLs in its guarantor capacity, the plaintiffs have stated a claim under 5 U.S.C. § 706(1). Defendant argues that the factual allegations of the Amended Complaint demonstrate that PBGC has already complied with its obligations to issue IDLs. At most, the Amended Complaint states only that some IDLs have been issued. (See Am. Compl. ¶ 42 ("Only after six years has the PBGC begun to issue a limited number of IDLs." (emphasis added)).) Furthermore, defendant's claim that it now has issued "virtually all IDLs" is unsupported by any sworn statement or documentary evidence. Thus, I cannot dismiss plaintiffs' claim to compel action by PBGC in its guarantor capacity under 5 U.S.C. § 706(1) at this juncture.

CONCLUSION

Defendant's motion to dismiss is granted in part and denied in part. Counsel are directed to appear for a conference on _____, 2000 at ___ a.m.