Opinion
Civil Action No. 3:03-CV-2173-G.
August 12, 2004
MEMORANDUM ORDER
Before the court are the following motions: (1) the motion of the plaintiff Pension Benefit Guaranty Corporation ("PBGC") to dismiss the first counterclaim of the defendant Cafeteria Operators, L.P. ("COLP") for failure to state a claim; (2) the motion of COLP for declaratory judgment; and (3) the motion of PBGC for summary judgment. For the reasons discussed below, COLP's first counterclaim is dismissed for lack of subject matter jurisdiction. PBGC's Rule 12(b)(6) motion to dismiss is therefore denied as moot. Further, COLP's motion for declaratory judgment is denied, and PBGC's motion for summary judgment is granted.
This counterclaim is set forth in ¶¶ 15-26 of the defendant's Answer and Counterclaim.
I. BACKGROUND
This case arises under Title IV of the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended, 29 U.S.C. §§ 1301- 1461 (2000). Complaint ¶ 1; Answer and Counterclaim ("Answer") ¶ 1. PBGC is a United States government corporation established under 29 U.S.C. § 1302(a) to administer the ERISA pension plan termination insurance program. Complaint ¶ 4. COLP is the plan administrator for the Cavalcade Pension Plan ("Plan"), Complaint ¶ 5; Answer ¶ 4, a single employer defined pension plan covered by Title IV of ERISA. Complaint ¶ 8; Answer ¶ 4.
On January 3, 2003, COLP filed a voluntary petition under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Northern District of Texas. Complaint ¶ 9; Answer ¶ 4. Shortly thereafter, on January 10, COLP moved for a "distress termination" of the Plan pursuant to 29 U.S.C. § 1341(c). Complaint ¶ 10; Answer ¶ 4. The bankruptcy court entered an order on March 6, 2003 granting COLP's motion. Complaint ¶ 11; Answer ¶ 4.
A "distress termination" is appropriate when each person who is a contributing sponsor of such plan or a member of such sponsor's controlled group has: (1) filed a petition for liquidation in bankruptcy or insolvency proceedings; or (2) filed a petition seeking reorganization in bankruptcy or insolvency proceedings; or (3) demonstrated that termination is required to enable payment of debts while staying in business or to avoid unreasonably burdensome pension costs caused by a declining workforce. 29 U.S.C. § 1341(c)(2)(B)(i)-(iii).
As provided by the bankruptcy court's order, PBGC and COLP took steps to terminate the Plan under 29 U.S.C. § 1341. Plaintiff's Brief in Support of Motion to Dismiss ("PBGC's Brief") at 6. However, based on the financial information made available by COLP, PBGC was unable to determine that the Plan had sufficient assets to provide guaranteed benefits. Complaint ¶ 14; Answer ¶ 7. Therefore, as authorized by 29 U.S.C. § 1341(c)(3)(B)(iii), PBGC began to institute proceedings to terminate the Plan under 29 U.S.C. § 1342. Complaint ¶ 14; Answer ¶ 7.
29 U.S.C. § 1341(c)(3)(B)(iii) provides that "[i]n any case in which [PBGC] determines that it is unable to determine that the plan is sufficient for guaranteed benefits on the basis of the information made available to it, [PBGC] shall commence proceedings in accordance with section 1342 of this title."
29 U.S.C. § 1342 provides for expedited plan termination, Pension Benefit Guaranty Corporation v. FEL Corporation, 798 F. Supp. 239, 240 (D.N.J. 1992), "in order to protect the interests of the participants or to avoid any unreasonable deterioration of the financial condition of the plan or any unreasonable increase in the liability of the fund." 29 U.S.C. § 1342(c).
Under 29 U.S.C. § 1342, plan termination and the appointment of a trustee may be accomplished by an agreement between the plan administrator (here, COLP) and PBGC, or by order of a United States district court. Complaint ¶ 14; Answer ¶ 7. PBGC initially drafted an agreement for signature by PBGC and COLP to effectuate Plan termination. See Complaint ¶ 14; Answer ¶ 7; see also generally Agreement for Appointment of Trustee and Termination of Plan ("Agreement"), attached to PBGC's Brief as Exhibit A. However, COLP refused to sign the Agreement, citing the unresolved issue of whether recent Plan benefit increases should be phased-in pursuant to 29 U.S.C. § 1322, or guaranteed in full. Complaint ¶ 14; Answer ¶ 7. PBGC stated at the time, and still maintains, that it cannot make a benefits determination until the Plan has been terminated. PBGC's Brief at 7-9. As a result of COLP's refusal to terminate the Plan by agreement, PBGC was forced to file this suit, in which it seeks the termination of the Plan, the appointment of PBGC as trustee of the Plan, and the establishment of March 19, 2003 as the Plan termination date. Complaint at 6.
Within sixty months of the proposed Plan termination date, certain amendments were made to the Plan that resulted in increased benefits. See Brief in Support of Motion for Declaratory Judgment ("COLP's Brief") [ attached to Cafeteria Operators, L.P.'s Motion for Declaratory Judgment as Exhibit A] at 3-4. The benefit increases were the result of the settlement of a class action lawsuit (" Aull Litigation") and a mandate by the Internal Revenue Service. COLP's Brief at 3.
"[A]ny increase in the amount of benefits under a plan resulting from a plan amendment which was made, or became effective, whichever is later, within 60 months before the date on which the plan terminates," is not fully guaranteed by PBGC. 29 U.S.C. § 1322(b)(1)(B). Instead, increases are guaranteed only to the extent of the greater of:
(1) 20 percent of the amount which, but for the fact that the plan amendment has not been in effect for 60 months or more, would be guaranteed; or
(2) $20 per month,
multiplied by the number of years (but not more than 5) the plan or amendment . . . has been in effect.29 U.S.C. § 1322(b)(7)(A)-(B).
In its answer to PBGC's complaint, COLP counterclaimed for declaratory judgment. Answer ¶¶ 15-28. COLP seeks, in its counterclaim, an order from the court: (1) declaring that the Plan benefit increases made pursuant to a court-approved settlement agreement and an IRS audit are not subject to 29 U.S.C. § 1322 and must be fully guaranteed by PBGC; (2) terminating the plan pursuant to 29 U.S.C. § 1342(c); (3) establishing March 19, 2003 as the termination date of the plan; and (4) appointing PBGC trustee of the plan. Answer ¶ 28.
II. ANALYSIS A. PBGC's Rule 12(b)(6) Motion to Dismiss
PBGC has moved, pursuant to FED. R. CIV. P. 12(b)(6), to dismiss COLP's first counterclaim. However, the court has a duty to consider jurisdictional objections sua sponte, Orix Credit Alliance, Inc. v. Wolfe, 212 F.3d 891, 895 (5th Cir. 2000), "before determining the validity of a claim." Moran v. Kingdom of Saudi Arabia, 27 F.3d 169, 172 (5th Cir. 1994) (quoting Gould, Inc. V. Pechiney Ugine Kuhlmann, 853 F.2d 445, 450 (6th Cir. 1988)). Accordingly, the court will first consider the justiciability of COLP's first counterclaim for declaratory judgment.
1. Justiciability of a Declaratory Judgment Action
The Declaratory Judgment Act ("Act"), 28 U.S.C. § 2201, allows federal courts the opportunity to "declare the rights and other legal relations of any interested party seeking such declaration. . . ." 28 U.S.C. § 2201(a). A declaratory judgment is often sought before a completed injury-in-fact has occurred, United Transportation Union v. Foster, 205 F.3d 851, 857 (5th Cir. 2000), and often contemplates an "ex ante determination of rights." Rhode Island v. Narragansett Indian Tribe, 19 F.3d 685, 692 (1st Cir. 1994), cited in Orix Credit Alliance, 212 F.3d at 896. However, the Act does not extend the subject matter jurisdiction of the court beyond the limits delineated in Article III of the United States Constitution. Skelly Oil Company v. Phillips Petroleum Company, 339 U.S. 667, 671 (1950); see also Okpalobi v. Foster, 244 F.3d 405, 434 (5th Cir. 2001) (en banc) ("[T]he Declaratory Judgment Act does not itself grant federal jurisdiction."). Declaratory judgments "still must be limited to the resolution of an `actual controversy.'" United Transportation, 205 F.3d at 857 (citing Aetna Life Insurance Company v. Haworth, 300 U.S. 227, 239-40 (1937)); see also Standard Fire Insurance Company v. Sassin, 894 F. Supp. 1023, 1026 (N.D. Tex. 1995) ("The Declaratory Judgment Act does not exempt federal district courts from the constitutional requirement that there be an actual controversy between the parties.").While there is no mechanistic process to determine whether an "actual controversy" exists in a declaratory judgment action, the Supreme Court has clearly instructed that "the question in each case is whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment." Maryland Casualty Company v. Pacific Coal Oil Company, 312 U.S. 270, 273 (1941); see also GTE Sylvania, Inc. v. Consumers Union of the United States, Inc., 445 U.S. 375, 382 (1980) (stating that Article III's case-or-controversy requirement limits "federal courts to questions presented in an adversary context. . . .") (citation and internal quotation marks omitted). Further, the controversy "must be such that it can presently be litigated and decided and not hypothetical, conjectural, conditional or based upon the possibility of a factual situation that may never develop." Rowan Companies, Inc. v. Griffin, 876 F.2d 26, 28 (5th Cir. 1989) (quoting Brown Root, Inc. v. Big Rock Corporation, 383 F.2d 662, 665 (5th Cir. 1967)); see also CH Nationwide, Inc. v. Norwest Bank Texas NA, 208 F.3d 490, 493 (5th Cir. 2000) ("Federal courts are not in the business of rendering advisory opinions.").
2. Justiciability of COLP's Counterclaim for Declaratory Judgment
COLP seeks, in its first counterclaim for declaratory judgment, an order from the court declaring that the Plan benefit increases made pursuant to a court-approved settlement agreement and an IRS audit are not subject to 29 U.S.C. § 1322 and must be fully guaranteed by PBGC. Answer ¶ 28. An "actual controversy" does exist, COLP argues, because PBGC has refused "to make a determination regarding the Plan benefit increases and adopt the position of COLP with respect to the same." Cafeteria Operators, L.P.'s Response in Opposition to Plaintiff's Motion to Dismiss ("COLP's Response") at 3. The court disagrees that this case presents an "actual controversy."
PBGC and COLP do not have "adverse legal interests" with regard to the application of 29 U.S.C. § 1322 to the recent Plan benefit increases. "PBGC has not yet determined the applicability of [ 29 U.S.C. § 1322] to the Plan amendments," Plaintiff's Opposition to Defendant's Motion for Declaratory Judgment at 9-10, and, in fact, stated to COLP that it will "fully review" the issue. Letter from Joan Segal, Attorney, PBGC, to Greta Cowart, Esq., Haynes and Boone, LLP, et al. (August 5, 2003), included in Correspondence Between COLP and PBGC [ attached to Reply in Support of Motion for Declaratory Judgment as Exhibit A] at 9.
Moreover, the relief COLP requests would amount to nothing more than an advisory opinion. COLP vigorously argues that PBGC "has the authority to advise a plan administrator as to whether the phase in rules apply," COLP's Response at 5-6 (emphasis added), as well as the "authority to indicate whether it concurred or disagreed with the plan administrator['s]" determination. Id. at 6 (emphasis added). In light of PBGC's refusal to "advise" COLP on how "to determine maximum guaranteed benefits in its capacity as plan administrator," id. at 5, COLP has turned to the court seeking the same advice. Id. at 7 ("COLP is seeking . . . a determination of whether certain benefit increases are subject to the phase in rules. . . ."). However, the court is "not in the business of rendering advisory opinions." CH Nationwide, Inc., 208 F.3d at 493.
Because COLP's first counterclaim for declaratory judgment does not present an actual controversy, the court lacks subject matter jurisdiction over the claim. Standard Fire Insurance, 894 F. Supp. at 1026 ("If there is no actual controversy between the parties, the district court lacks subject matter jurisdiction. . . ."). Accordingly, COLP's first counterclaim is dismissed for lack of subject matter jurisdiction, and, in consequence, PBGC's Rule 12(b)(6) motion is denied as moot.
B. COLP's Motion for Declaratory Judgment
The Supreme Court has held that the Declaratory Judgment Act, 28 U.S.C. § 2201, grants discretion to district courts rather than an absolute right to a litigant. Wilton v. Seven Falls Company, 515 U.S. 277, 288 (1995) ("By the Declaratory Judgment Act, Congress sought to place a remedial arrow in the district court's quiver; it created an opportunity, rather than a duty, to grant a new form of relief to qualifying litigants."); see also Sherwin-Williams Company v. Holmes County, 343 F.3d 383, 389 (5th Cir. 2003). The Fifth Circuit has outlined the three steps a district court must follow to determine whether to decide or dismiss a declaratory judgment case: first, the district court must determine whether the declaratory action is justiciable; second, the district court must determine whether it has the authority to grant declaratory relief; and, third, the court must determine whether to exercise its discretion to decide or dismiss the action. Sherwin-Williams, 343 F.3d at 387.
1. Justiciability of the Action
COLP seeks, in its motion for declaratory judgment, an order from the court declaring that "the amendments to the Cavalcade Pension Plan adopted in response to the Aull Litigation and the subsequent IRS audit of the Plan's 1994 Form 5500 are not subject to the phase-in requirements of 29 U.S.C. § 1322, and that the amendments at issue are immediately effective in total." Cafeteria Operators, L.P.'s Motion for Declaratory Judgment ("COLP's Motion for Declaratory Judgment") ¶ 1. This motion simply reurges the issue raised in COLP's first counterclaim for declaratory judgment, discussed supra at 7-9. Just as COLP's counterclaim does not present an actual controversy, so also COLP's declaratory judgment action does not present an actual controversy and is therefore not justiciable. Because the threshold test in the declaratory judgment analysis set forth in Sherwin-Williams is not met, the court need not examine the second and third steps. Accordingly, COLP's motion for declaratory judgment is denied.
Even if the court assumes arguendo that COLP's declaratory judgment action is justiciable, and that this court has the authority to decide it, the court, in its discretion, would not grant the requested relief. COLP's own motion acknowledges that the decision regarding whether recent Plan benefit increases are subject to ERISA's phase-in rules falls within the authority of PBGC. COLP's Brief at 5 ("COLP requested that the PBGC determine . . . that the Plan benefits increases resulting from the amendments . . . are fully guaranteed by the PBGC."); see also COLP's Response at 5 ("Neither [ERISA] nor the regulations prevent the PBGC from resolving this issue during the course of distress termination proceedings."). "[T]he declaratory judgment procedure will not be used to preempt and prejudge issues that are committed for initial decision to" PBGC. See Public Service Commission of Utah v. Wycoff Company, Inc., 344 U.S. 237, 246 (1952). Furthermore, "[j]udicial intervention into the agency process denies the agency an opportunity to correct its own mistakes and to apply its expertise." Federal Trade Commission v. Standard Oil Company of California, 449 U.S. 232, 242-43 (1980).
C. PBGC's Motion for Summary Judgment 1. Evidentiary Burdens on Motion for Summary Judgment
Summary judgment is proper when the pleadings and evidence on file show that no genuine issue exists as to any material fact and that the moving party is entitled to judgment as a matter of law. FED. R. CIV. P. 56. "[T]he substantive law will identify which facts are material." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The movant makes such a showing by informing the court of the basis of its motion and by identifying the portions of the record which reveal there are no genuine material fact issues. See Celotex Corporation v. Catrett, 477 U.S. 317, 323 (1986). Once the movant makes this showing, the nonmovant must then direct the court's attention to evidence in the record sufficient to establish that there is a genuine issue of material fact for trial. Id. at 323-24. To carry this burden, the opponent must do more than simply show some metaphysical doubt as to the material facts. Matsushita Electric Industrial Company, Ltd. v. Zenith Radio Corporation, 475 U.S. 574, 586 (1986). Instead, the nonmovant must show that the evidence is sufficient to support a resolution of the factual issues in its favor. Anderson, 477 U.S. at 249. All of the evidence must be viewed, however, in a light most favorable to the motion's opponent. Id. at 255 (citing Adickes v. S.H. Kress Company, 398 U.S. 144, 158-59 (1970)).
The disposition of a case through summary judgment "reinforces the purpose of the Rules, to achieve the just, speedy, and inexpensive determination of actions, and, when appropriate, affords a merciful end to litigation that would otherwise be lengthy and expensive." Fontenot v. Upjohn Company, 780 F.2d 1190, 1197 (5th Cir. 1986).
2. PBGC's Motion for Summary Judgment
Title IV of ERISA provides the "exclusive means of [pension] plan termination." Hughes Aircraft Company v. Jacobson, 525 U.S. 432, 446 (1999) (quoting 29 U.S.C. § 1341(a)(1)). Under ERISA, an employer may voluntarily terminate a plan through a "standard termination," or through a "distress termination." Pension Benefit Guaranty Corporation v. LTV Corporation, 496 U.S. 633, 638-39 (1990). A "distress termination" may only proceed if PBGC is able to determine that each person who is a contributing sponsor of such plan or a member of such sponsor's controlled group has: (1) filed a petition for liquidation in bankruptcy or insolvency proceedings; or (2) filed a petition seeking reorganization in bankruptcy or insolvency proceedings; or (3) demonstrated that termination is required to enable payment of debts while staying in business or to avoid unreasonably burdensome pension costs caused by a declining workforce. 29 U.S.C. § 1341(c)(2)(B)(i)-(iii). If PBGC determines that the requirements for a "distress termination" have been met, PBGC is then required to determine the sufficiency of the pension plan's assets to satisfy the benefit liabilities. 29 U.S.C. § 1341(c)(3)(A). However, if PBGC is unable to make such a determination, 29 U.S.C. § 1341(c)(3)(B)(iii) directs PBGC to institute plan termination proceedings under 29 U.S.C. § 1342.
Under section 1342, PBGC may apply to the appropriate United States district court for a decree adjudicating that the plan must be terminated, as well as for the appointment of a trustee. 29 U.S.C. § 1342(b)(1)-(c). The plan termination date may be established either by agreement between PBGC and the plan administrator, or by the court. 29 U.S.C. § 1348(a)(4).
In the case sub judice, there is no genuine issue of material fact, as both parties agree that each of the requirements for plan termination has been met. On January 3, 2003, COLP filed a petition under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Northern District of Texas. Complaint ¶ 9; Answer ¶ 4. Then, on January 10, COLP moved for a "distress termination" of the Plan pursuant to 29 U.S.C. § 1341(c). Complaint ¶ 10; Answer ¶ 4. COLP also provided a Notice of Intent to Terminate the Plan to both PBGC and the affected parties, as required by ERISA. Complaint ¶ 10; Answer ¶ 4. After a hearing on March 6, 2003, in which COLP demonstrated that not even the reorganization of the Plan's debt would allow the Plan to continue, the bankruptcy court granted COLP's motion for "distress termination." Complaint ¶ 11; Answer ¶ 4.
The parties disagree whether COLP's counterclaim for declaratory judgment regarding the application of 29 U.S.C. § 1322 to recent Plan benefit increases presents a genuine issue of material fact precluding summary judgment. Memorandum of Law in Support of Pension Benefit Guaranty Corporation's Motion for Summary Judgment at 13-16; see also generally Cafeteria Operators, L.P.'s Response in Opposition to Plaintiff's Motion for Summary Judgment. In light of the court's dismissal of COLP's first counterclaim, however, this dispute does not preclude summary judgment.
PBGC, as required by 29 U.S.C. § 1341(c), determined that the Plan met all of the requirements for a distress termination. Complaint ¶ 14; Answer ¶ 7. However, PBGC was unable to determine that the Plan was sufficient to provide guaranteed benefits. Complaint ¶ 14; Answer ¶ 7. As directed by 29 U.S.C. § 1341(c)(3)(B)(iii), PBGC began to institute plan termination proceedings under 29 U.S.C. § 1342. Complaint ¶ 14; Answer ¶ 7. On September 23, 2003, PBGC applied to this court for a decree adjudicating the termination of the Plan under 29 U.S.C. § 1342(c), appointing PBGC trustee of the Plan, and establishing March 19, 2003 as the Plan termination date. See generally Complaint.
Furthermore, both PBGC and COLP seek entirely the same relief. Complaint at 6 ("PBGC respectfully requests that the Court issue an Order granting the following relief: 1. Terminating the Plan pursuant to 29 U.S.C. § 1342(c); 2. Appointing PBGC trustee of the Plan pursuant to 29 U.S.C. § 1342(b); 3. Establishing March 19, 2003, as the termination date of the Plan pursuant to 29 U.S.C. § 1348(a)."); Answer ¶ 28 ("COLP respectfully requests that this court enter an Order . . . terminating the Plan pursuant to 29 U.S.C. § 1342(c); establishing March 19, 2003 as the termination date of the Plan; [and] appointing PBGC trustee of the Plan. . . .").
Because this case does not present genuine issues of material fact, PBGC's motion for summary judgment is granted. Accordingly, the Plan is terminated pursuant to 29 U.S.C. § 1342(c), PBGC is appointed trustee of the Plan, and the Plan termination date is established as March 19, 2003.
III. CONCLUSION
For the reasons discussed above, COLP's first counterclaim is DISMISSED, pursuant to FED. R. CIV. P. 12(b)(1), for lack of subject matter jurisdiction. PBGC's Rule 12(b)(6) motion to dismiss that counterclaim is therefore DENIED as moot. Further, COLP's motion for declaratory judgment is DENIED, and PBGC's motion for summary judgment is GRANTED.
Within ten days of this date, counsel for PBGC shall submit a proposed form of judgment conforming to this memorandum order.
SO ORDERED.