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Compliance May 22, 2008
Fiduciary Liability Claim Dismissed in US Airways Suit
May 22, 2008 (PLANSPONSOR.com) - The U. S. District
Court for the District of Columbia has determined the Pension
Benefit Guaranty Corporation (PBGC) did not breach its
fiduciary duty to former pilots of US Airways when it took
over their terminated pension plan.
Reported by Rebecca Moore
According to the court, the PBGC would have an obligation to correct an ongoing breach first made by US Airways in administering the plan, but the breach alleged in this case was a “single event as to each Plaintiff with no continuing effect to the present.” The plaintiffs are four retired pilots who claim they are due interest on lump-sum pension payments delayed by US Airways and that the PBGC, as successor trustee, breached its fiduciary duties by failing to correct the breaches by US Airways.
The court noted that participants are allowed to advance both a claim for benefits and fiduciary breach claim, but said that in this case it does not help the plaintiffs. “Plaintiffs have adequate potential remedies if in fact they were denied benefits through a delayed payment, and, accordingly, their fiduciary breach claims will be dismissed,” the opinion said.
In addition, the court found an award of payment of attorney’s fees by the PBGC is not available to the former pilots, saying the law includes a provision for attorney’s fees against plan administrators and others, but does not include a similar provision for claims for fees against the PBGC.
The former pilots initiated the lawsuit against the airline in 2000, claiming that US Airways’ practice was to distribute lump-sum benefits within 45 days after the actual retirement date without paying interest – a practice the airline said was an agreement with the pilots’ union. According to the opinion, the former pilots alleged that the practice of delaying the distributions violated Title I of the Employee Retirement Income Security Act (ERISA) because the present value of the sums actually received was not the actuarial equivalent of the present value as of the participants’ normal retirement date.
On July 25, 2001, a district court granted a motion to dismiss by US Airways and the plan, holding that each of the plaintiffs’ claims required an interpretation of the retirement plan, which was the exclusive jurisdiction of the Retirement Board. The former pilots appealed the decision, but the airline filed a bankruptcy petition, so the appellate court stayed the case until bankruptcy proceedings were completed in 2005.
Meanwhile, in 2003, the plan was terminated and the PBGC was assigned as successor trustee.
The ruling in Stephens et. al. v. US Airways Group, et. al. is here .