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Case number 17-5068, K. Wendell Lewis at L vs. Pension Benefit Guarantee Corporation Appellate.

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Mr. Thank you for the appellate.

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Mr. Shelley for the appellate.

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Good morning.

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Good morning.

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Your Honor has been released to court.

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My name is Charles Spenke.

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I'm Deputy General Counsel with Pension Benefit Guarantee Corporation, or PBGC.

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I'd like to reserve three minutes for rebuttal.

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This case is before the court on interlocutory appeal.

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Why is that?

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Why should we be looking at this case now?

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Your Honor, because

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The district court recognized that it had issued a decision that was unprecedented in this circuit or anywhere in holding that PBGC could be liable for benefits in excess of the statutory benefits.

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And I think also realized that... That happens all the time.

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District courts make decisions on cases of first impression.

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Yes, Your Honor, but I think here, given the procedural posture of the case, two things.

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First of all, the rest of the case that is a more traditional benefit determination decision is proceeding in the district court.

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the fiduciary breach aspect would have continued in the district court.

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And if PBGC would have prevailed on the merits of a fiduciary breach case, we would have had the district court's decision and had no basis or no ability on appeal to have that decision reviewed.

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Why?

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I mean, typically, if there's a decision that makes a difference, you can bring it up after final judgment.

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His hypothetical is that it doesn't make a difference because the corporation wins on the merits.

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We will be found to not have to make a fiduciary breach.

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Oh, I see.

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And so on appeal, the issue won't be available to say that it was inappropriate.

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I thought the principle, the idea,

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behind the interlocutory appeal was that if you were correct in your reading of the law, an enormous litigation involving all kinds of factual detail, and I'm sure legal arguments as well, could be a verdict.

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That's the second point, Your Honor.

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Yes, that the case currently is on the administrative record on benefit determination.

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The fiduciary breach case would involve probably a great deal of discovery, additional motion practice, and a trial, which can be averted on appeal if PBGC were to prevail.

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As I indicated, the district court's decision is unprecedented in that it subjects PBGC to the potential of participant recoveries in excess of their statutory benefit.

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Can you help me with the very, what to my eye is a very strange wording of section 1344C?

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The last sentence and the preceding sentence just seemed to me to say two different things, and I'm sure there's some context there that I'm missing.

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I think, Your Honor, that you've correctly observed that

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The first sentence is fairly difficult to parse about what it means.

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In this case, where it talks about an increase or decrease

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on the later of the date a trustee is appointed under section 1342b, or the date on which the plan is terminated is to be allocated between the corporation in a manner determined by the court.

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Here, that sentence doesn't

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Whatever it means, it doesn't apply because there was no trustee appointed under 1342B.

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Although 1342B, doesn't the very last part of it refer to corporation trustees?

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Corporation can step in and be the trustee, so that wasn't entirely, didn't seem entirely dispositive to me that that didn't apply.

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So 1342B is a trustee before plan termination,

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It turns out in PBGC's history, that part of the statute is not.

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had used.

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As it's turned out, PBGC has become trustee of plans after plan termination or contemporaneous with the plan termination.

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And so 1342B has had very little effect.

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Similarly, there was no court appointed trustee here.

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The plan sponsor and PBGC agreed to PBGC's appointment

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as trustee.

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So none of the triggering events of the first sentence happened here.

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I'm sorry.

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What about subsection two there, or the second trigger?

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The date on which the plan is terminated is to be allocated.

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Well, it's, again, as determined by the court.

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It's getting on the later of, and then.

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Right.

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And I think one of the difficulties in understanding that is,

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that if one ever were to happen, that is, number one, if it were to ever happen, it would have to happen before number two.

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So, again, it is... Okay, but what about two?

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That's what I'm... Well, here there were...

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It says in a manner determined by the court.

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Here, there was, in the case of a court-appointed trustee.

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Here, there was no court-appointed trustee.

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So then you would go to, or as agreed upon by the corporation and the plan administrator.

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And here, there was no agreement between the corporation and the plan administrator.

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So none of those things happened.

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So it's court-appointed and agreement.

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Otherwise, you have no agreement.

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Right.

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So none of those things happened.

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And so you go to the clear language

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of the second sentence, which says any increase or decrease in the value of assets of a plan occurring after the date on which the plan is terminated should be credited to or suffered by the corporation.

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So you acknowledge that this first sentence is hard to parse.

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And something in your recent answer suggested that you think maybe there was actually an error in the way that it was written, and that seemed to be the position you took in your brief, that it was dealing with the potential period between when

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a trustee is appointed and the plan is terminated?

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It appears to be anticipating, again, in 1974, Congress didn't know whether there would or wouldn't be 1342B trustees.

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There haven't been.

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But it appears to be addressing the concept of if there was a pre-termination trustee, how assets would be allocated in that event.

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That's what it seems to be putting through.

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Basically the idea is to keep the, to have some accountability during that period.

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I think so.

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But it's not actually written that way.

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But you're just saying that's not our problem because it also is written at least in a way that doesn't apply here.

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Exactly.

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Exactly.

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And the clarity of the second sentence does apply here, which there was a plan termination date.

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PBGC valued the assets as of that date.

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And so all gains and losses since that date in 2006 are credited to or suffered by the corporation.

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So.

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The parties in the appeal really present two very dramatically different views of PBGC and the Title IV insurance system.

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The plaintiffs argue and close their brief with the assertion that Section 1303F in Title IV

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is an at-large fiduciary breach remedy unmoored to the rest of Title IV authorizing the disgorgement of PBGC investment returns when a benefit claim is accompanied by another claim alleging procedural violations.

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PBGC, on the other hand, maintains that the law is clear in the context of fine benefit plans.

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individual participants have an interest in their plan benefit while that plan is ongoing

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whether there's allegations of fiduciary breach or not.

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Isn't there a more fundamental distinction?

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And I'm not arguing that there is, but I'm asking you to help me understand.

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The pilots seem to be suing the corporation for fiduciary breach in its capacity as a trustee.

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You seem to be arguing that the corporation has been acting in its capacity as a guarantor

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And those might lead to very different responsibilities of the corporation.

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Am I right or?

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Yes, Your Honor.

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Certainly, the pilots are asserting that through this whole process, we've been acting as the trustee.

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Our view is, and again, Title IV in 1342,

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Section D talking about that trustee says that the statutory trustee can be a Title I fiduciary to the extent that it's not inconsistent with Title IV.

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It doesn't say

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Clearly, when PBGC is acting as trustee and when it's acting as guarantor, certainly in the stage of the... Whichever way it's acting, it's governed by 1344C, right?

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Yes, 1344C talks about the corporation.

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It doesn't talk about the trustee.

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It is talking about gains or losses being suffered by the corporation, not by the statutory trustee.

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Is your argument that the corporation is acting as a guarantor and therefore claims for breach of fiduciary duty don't apply?

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most of that argument would happen if the case were to go to trial because I think there's

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There's assertions that the plaintiff made that we were doing certain things as a trustee that we don't agree with.

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But our motion to dismiss is on the more basic reasons that the producer of breach claims that... That's something that would need to be developed factually if it proceeded.

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You're saying that in this instance you're acting as a trustee, in this instance you're acting as a guarantor.

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out of this instance there was a fiduciary responsibility, this there's not.

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That's something that we need to develop factually, is that okay?

[00:13:02] Speaker 01:
Yes, Your Honor, that's not the main point of this.

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Is the main point on the fiduciary, the potentially permissible claims against the fiduciary is that a Title IV claim of fiduciary breach can only proceed as fiduciaries defined

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in Title I, in other words, on behalf of the plan?

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I'm trying... That's one of the four questions, Your Honor, yes, is whether individual relief is appropriate because... And the plan-wide relief is clear in Title I, that an individual can only get plan-wide relief if they're arguing fiduciary breach.

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And then Title IV is written a little bit differently, but you have a theory that

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reinvokes that Title I limitation for purposes of a Title IV fiduciary breach claim, and I'm just trying to remind myself what that, or have your help in reminding what that is.

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Essentially, the district court and the plaintiff's idea is that

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the Title IV provision is actually broader than Title I. But in fact, the only reason that you could sue PBGC as a fiduciary is because Title IV says in 1342 that in limited circumstances,

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the statutory trustee can be a Title I fiduciary.

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So implicit in that is you're only as liable, the most sort of the high watermark for liability for PBGC would be Title I, is our view.

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So yes, the whole plan wide.

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It seems like if we were to take up the merits of these issues on this interlocutory frame, we would not need to answer all of the questions.

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And I wonder if you have any suggestions.

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I mean one of the things that strikes me is we don't ordinarily

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decide issues on interlocutory basis, and some of my response tentatively to some of these questions is, well, it depends on the nature of the claim, it depends on the context.

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So I'm interested in where the firmest ground is that does the work in your view, and I'm interested in that from this.

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Your Honor, I think the two points

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The two questions, the one that deals with a little bit what I've been talking about, that Title IV says PPGC participants are only entitled to their statutory benefits.

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And under sections 1322, 1344, and 1361, it's clear that's all that PPGC is permitted to pay.

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That argument, the fact that other equitable relief

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under Title IV, here it still has to be addressing

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something that they are adversely affected by.

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That's what 1303F says.

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Here, the only adverse effect that they're arguing is the benefit determinations, the loss of benefits, whether it's by fiduciary breach or a more general argument.

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The related point is the 1344 point that gains or losses or PBGCs and disgorgement is prohibited.

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I would especially, again, on interlocutory appeal,

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The question in Title I about when a claim for benefits can be accompanied by a claim under 1132A3 for other equitable relief is one that the circuit courts are all over.

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support them.

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We cite the fourth, sixth and seventh, and every district court in this circuit as supportive of our position, and I think you probably don't need to reach that one.

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Probably don't.

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Don't, right, that you can rely on.

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I mean, it seemed like if we reached 1344C issue, for example, we wouldn't need to reach anything else in the context of this case.

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But that wasn't the first thing out of your mouth when I said, what do you think is the firmest and clearest ground?

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Well, I think the two arguments are related.

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The fact that the sections that say what we can pay limited us to the Title IV benefits.

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That combined with 1344C, that says, and investment assets are PBGCs.

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Flip sides of the same coin as you see it.

[00:18:03] Speaker 03:
Good morning, and may it please the court.

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I'm Anthony Shelley, here on behalf of the appellees, who I will refer to as the pilots.

[00:18:09] Speaker 03:
I'd like to begin with Judge Pillard's question about 1344C that she began with, and then turn to the trustee role that Judge Griffith mentioned, and then also get to what may be the paramount issue from our perspective.

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So first of all, on section 1344C,

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Your Honor, the Second Circuit has noticed exactly what you did, that the first sentence and the second sentence are contradictory and don't seem to make sense, and there's a case on this Kinect, K-I-N-E-K, versus paramount communication, 22F3rd, Bible 3, and the important pages are 515, 516, and I did let Mr.

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I think you know I might mention that case.

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But in this case, if you parse the language, Mr. Finke said that the PBGC was not appointed a trustee, so the first sentence doesn't matter, and that's, in our view, false.

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What's under 1342b?

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Well, they were appointed, if you look to 1342,

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B3, it says the corporation, this is on page 115 of the statutory addendum, the corporation and the planned administer may agree to the appointment of the trustee without proceeding in accordance with the requirements of one or two above.

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That's what happened here.

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They had an agreement with the plan administrator that they would be appointed the trustee.

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And in fact, on page two of their opening brief, they note what goes on in these cases.

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Plans are terminated, a trustee is appointed, they say, and invariably the PBGC becomes the trustee.

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So there was the appointment of a trustee.

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And importantly, from the perspective of the first sentence of 1344C, it happened at this... Wait, wait, wait.

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Go back to that, because I was...

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pouring over that and I read it the way that Mr. Finke read it.

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So if we go to again page 115 of the statutory addendum, section 1342

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B3.

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So it's towards the middle of the page.

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The corporation may agree to appointment of a trustee without proceeding in accordance with the requirements of one and two.

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So what happened here was the agreement was as to the appointment.

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So there is an appointment here by agreement.

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And in fact, the first sentence then of 1344, 1344C also talks about two types of appointment.

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In the parenthetical, it says if

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If it's a court-appointed trustee, here, the court didn't appoint it.

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It was appointed by agreement.

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So the second part comes into play, which is that was there an agreement?

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As agreed upon by the corporation and the plan administrator in any other case.

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But the other important point here is that the plan was terminated in September of 2006, and the trustee, they, were appointed in December of 2006.

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So the later of the dates here is their appointment.

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And so the first sentence, if this wants to be parsed literally,

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The first sentence is the one that governs because the second sentence governed for three months from September of 2006 to December of 2006.

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Then the first sentence kicked in because the later of the two dates was the appointment of the trustee making

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The first sentence, the trigger, and the only part of that first sentence then that becomes relevant since they weren't a court-appointed trustee is the last part where they had to have an agreement.

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And there was none.

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We'll concede that.

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But the point of all of it is,

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It's an irrelevancy.

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1344C becomes an irrelevancy.

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And to negate section 130.

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I'm telling you what, it becomes irrelevant to because.

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Because there's no agreement.

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There'd be because.

[00:21:48] Speaker 03:
No.

[00:21:49] Speaker 05:
There's no agreement.

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1344C believes the last sentence is the default position, right?

[00:21:55] Speaker 03:
Except that the first sentence says the first sentence governs on the later of those two dates.

[00:22:00] Speaker 03:
And the later date is not the termination.

[00:22:03] Speaker 03:
The later date is the appointment of the trustee in this situation, meaning that

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that the only thing that could trump 1303S, the equity provision, would have to come out of the first sentence.

[00:22:15] Speaker 02:
So you're saying that you compare, you take the difference between the result under the first sentence, which is a period from the appointment, from the appointment of the trustee.

[00:22:31] Speaker 03:
The termination.

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The termination first, the trustee seconds.

[00:22:34] Speaker 02:
You take it from the,

[00:22:37] Speaker 03:
September 2006 to 2009.

[00:22:40] Speaker 02:
September to December.

[00:22:42] Speaker 02:
So you're just saying that's the only period you're concerned with.

[00:22:45] Speaker 03:
But the Second Circuit sort of addressed this in that case saying, we can't make heads or tails of this.

[00:22:49] Speaker 03:
And so it has to be interpreted narrowly.

[00:22:52] Speaker 03:
And we're not going to use it to override a district court's discretion in issuing remedies under ERISA.

[00:22:59] Speaker 03:
Because 1344 probably has a drafting error.

[00:23:02] Speaker 03:
And Judge Pillard, I think you mentioned that.

[00:23:04] Speaker 03:
The drafting error is probably in the first line.

[00:23:07] Speaker 03:
where the word any increase or decrease in the value of the assets of a single employer plan occurring during the period beginning on the later is probably ending.

[00:23:16] Speaker 03:
It's probably the word is supposed to be ending.

[00:23:19] Speaker 03:
If we want to read it the way the PBGC sort of has administered it, but it doesn't say that.

[00:23:25] Speaker 03:
So it creates some conundrums.

[00:23:27] Speaker 03:
But the point of it, again, from our perspective is that it should be narrowly read, not to Trump right.

[00:23:33] Speaker 05:
I guess I'm not sure about why.

[00:23:35] Speaker 05:
I'm not sure what narrowness means in this context.

[00:23:39] Speaker 05:
Cautiously maybe.

[00:23:40] Speaker 05:
Well, but I don't know that it is cautious to say that it is a good idea to have the fate of the assets

[00:23:57] Speaker 05:
after bankruptcy, determine what the pensioners are entitled to, or either that, or what must come out of the funds accumulated by the corporation for the benefit of pensioners who are otherwise going to get nothing, or much less than entitlement.

[00:24:25] Speaker 03:
Our position is that 1344C is an accounting measure.

[00:24:29] Speaker 03:
It uses the word in the last sentence, for instance, that the PBGC will be credited with gains.

[00:24:34] Speaker 03:
That's an accounting term.

[00:24:35] Speaker 03:
The dictionary definition is actually to put on the credit side of an account.

[00:24:42] Speaker 03:
We don't challenge this.

[00:24:43] Speaker 03:
any of that.

[00:24:44] Speaker 03:
Our only allegation is that wrongdoing occurred during the process of administering the plan, and if the PVTC gained as a result of it, we're entitled to that money under old equity.

[00:24:53] Speaker 03:
This provision as an accounting measure moving money during a period of time shouldn't trump it.

[00:24:57] Speaker 05:
You talk about it as an accounting measure, and much of your argument about what you would derive from the preservation of normal

[00:25:09] Speaker 05:
trustee liabilities, it doesn't seem to address the question of what does the trust instrument say.

[00:25:17] Speaker 05:
So suppose someone creates a trust with A as the life beneficiary, but not to get income, to get simply $100,000 a year, whatever the income may be, and whatever is left over to the remainder money.

[00:25:34] Speaker 05:
Would that life tenant be able to sue the trustee because the trustee was running it so well that there was huge income way in excess of the specified $100,000?

[00:25:48] Speaker 03:
not if the trustee didn't do anything wrong.

[00:25:50] Speaker 03:
In a case where in paying out the $100,000, let's say the trustee was late in paying out the $100,000, and did so because they wanted to gain enormous amounts of investment returns on it, they then gave the $100,000.

[00:26:03] Speaker 03:
The question is, does the trustee in that situation?

[00:26:05] Speaker 05:
I can see how under that trust, the beneficiary would be entitled to do any money that it lost through the delay in the payment of funds.

[00:26:15] Speaker 05:
But I don't see how it would.

[00:26:17] Speaker 03:
That's all we seek in claim one.

[00:26:21] Speaker 05:
Yeah, but it sounds to me as if you have a very broad notion of the causal connection.

[00:26:28] Speaker 05:
If there's some delay, and that can be causally connected to the investment of the assets doing extremely well, then you get the benefit of that.

[00:26:39] Speaker 05:
That doesn't seem to me to follow at all.

[00:26:41] Speaker 05:
That seems to completely disrupt what the set law in my hypothetical has created.

[00:26:46] Speaker 03:
Well, we have concrete harms here.

[00:26:48] Speaker 03:
For instance, two we identified, the two financial harms.

[00:26:51] Speaker 03:
And just claim one, even if on all the benefit claims we're successful, we still have concrete financial harms.

[00:26:57] Speaker 03:
And one is, for instance, and we noted this in our brief, the PBGC paid estimated benefits at the start of the period in 2006 that were lower than the final benefit determination.

[00:27:06] Speaker 03:
So for six years, they paid less money.

[00:27:09] Speaker 05:
They gave minimal interest.

[00:27:11] Speaker 05:
Would interest solve that?

[00:27:13] Speaker 03:
It doesn't solve it because the interest was at 1 or 2 percent whereas the PBGC was gaining 9 or 10 percent and as it returns.

[00:27:19] Speaker 05:
And the interest was at 1 or 2 percent because what?

[00:27:21] Speaker 03:
Because that was their statutory interest rate that they by regulation decided to pay.

[00:27:25] Speaker 05:
Ah, that sounds like something that's set lower.

[00:27:28] Speaker 05:
Arrange.

[00:27:29] Speaker 03:
But equity wouldn't countenance that.

[00:27:31] Speaker 03:
Old equity would insist that if the trustee gained as a result of having money that they shouldn't have had for the period they had.

[00:27:42] Speaker 05:
The trustee doesn't gain in this, certainly in my hypothetical.

[00:27:46] Speaker 05:
And I don't think the gain of the corporation is really to the benefit of other pensioners.

[00:27:51] Speaker 05:
So it's a strange view you're taking of the matter.

[00:27:55] Speaker 03:
No.

[00:27:58] Speaker 03:
are they're not here the government in the sense of the government corporation there here is a trustee which gets maybe to judge griffiths earlier question they took on this role and if it was a private situation that money would be in a purpose it would be in a bank it would be gaining money and if the trust would be losing money I mean that's the sort of

[00:28:17] Speaker 02:
Backdrop if we look at the scheme as a whole and if we're gonna have this this guarantee part of what makes it work is They say wow, you know retirees are in this tough place Depending on when their plan fails.

[00:28:35] Speaker 02:
What if it's a stock market crash?

[00:28:37] Speaker 02:
We're gonna

[00:28:38] Speaker 02:
take on insuring against that little sub-piece as well as being an overall insurer by just having a pre-judgment interest guarantee and will suffer the losses or take the investment benefits during that period of time.

[00:28:53] Speaker 02:
It seems like that's

[00:28:55] Speaker 02:
not an unreasonable approach for Congress to have taken, and if, in fact, that's the approach that 1344-C expresses.

[00:29:03] Speaker 03:
Well, Congress didn't take that approach.

[00:29:05] Speaker 03:
They set up two different functions under ERISA.

[00:29:07] Speaker 03:
They guarantee insurance FDIC-like guarantee that the PBGC plays, but they also set up a trustee role.

[00:29:14] Speaker 03:
And it's not necessarily the PBGC that should be paying it.

[00:29:17] Speaker 02:
Well, the question then is,

[00:29:19] Speaker 02:
what is the statutory field on which the trustee is operating?

[00:29:24] Speaker 02:
And that's why we started with 1344C, to figure out, if 1344C just says, you know, whatever happens with the investment value, with the delta, that's gonna go into the fund, and pre-judgment interest is gonna stand in, then there's no fiduciary issue there, is there?

[00:29:46] Speaker 03:
Well, there's a fiduciary issue if they, yes there is, because as a trustee, if they breach their fiduciary duty, the real provision that matters is 1303F first.

[00:29:56] Speaker 02:
What would their liability be?

[00:29:57] Speaker 02:
But I'm just saying that if we were to read 1344C the way that the PBGC would have us read it, it takes it off the table in terms of fiduciary duty.

[00:30:06] Speaker 03:
Well, it takes off-the-table disgorgement as a remedy, if you read it the way they do.

[00:30:10] Speaker 02:
There are other remedies for breaches of fiduciary duty, such as... But they wouldn't be breaching their fiduciary duty vis-a-vis that money, because that money is statutorily...

[00:30:21] Speaker 03:
it to me by keeping it.

[00:30:23] Speaker 03:
If the court were to read 1344 that way, then the money would be off limits to us.

[00:30:29] Speaker 03:
But it's the wrong way to read 1344C.

[00:30:32] Speaker 03:
And it also would hamper the PBGC, because think about it.

[00:30:34] Speaker 03:
It says that the PBGC gets credited with or suffers the losses.

[00:30:38] Speaker 03:
Well, if the PBGC illicitly suffers a loss, it can't sue anybody, supposedly, to get that money back.

[00:30:43] Speaker 03:
And that's what they tried to do in Kinnick, and the court said that you can't sue because you suffered a loss when someone else was responsible.

[00:30:49] Speaker 03:
And we would say, just like they could sue somebody if they suffered a loss illicitly, we can sue to get the gain back when they gained it illicitly.

[00:30:57] Speaker 03:
And that's what Judge Walton said.

[00:30:59] Speaker 03:
He said it can't mean that they get a credit

[00:31:01] Speaker 03:
or have to suffer a loss no matter what.

[00:31:03] Speaker 06:
Doesn't your reference to old equity, it doesn't get you as far as you want to go because we're not in old equity here.

[00:31:10] Speaker 06:
The corporation has this very distinct role.

[00:31:14] Speaker 06:
They have to be looking out for the assets of others as well, right?

[00:31:18] Speaker 06:
That's the way in which they are a very different type of trustee than you would be thinking of when you're talking about old equity.

[00:31:26] Speaker 06:
They have to be watching out for

[00:31:29] Speaker 06:
funds for others, not just for the pilots, right?

[00:31:32] Speaker 03:
Not when they're a trustee.

[00:31:33] Speaker 03:
When they're a trustee, they're looking out for our benefit.

[00:31:37] Speaker 03:
If Congress could have said the PBGC shall be the trustee, it wouldn't say that.

[00:31:41] Speaker 03:
It said all of this has to be done by a plan administrator who's a trustee, and then said the PBGC or anyone else who's qualified could be the trustee.

[00:31:49] Speaker 03:
So Congress didn't qualify anything.

[00:31:51] Speaker 03:
And actually, old equity is paramount, because that's the way the Supreme Court has said in Cigna versus Amara, for instance, that

[00:31:59] Speaker 03:
that appropriate equitable relief has to be interpreted in justice.

[00:32:05] Speaker 06:
But they weren't talking about what you're seeking here, which is disgorgement of... They were.

[00:32:12] Speaker 03:
They were talking about disgorgement from a fiduciary.

[00:32:15] Speaker 03:
The PBDC wasn't the party there, but it was disgorgement.

[00:32:17] Speaker 05:
What's the statute governing the fiduciary?

[00:32:21] Speaker 03:
So their obligations are set and are governed by 1342 where it says the trustee shall have all the obligations of a bankruptcy trustee or an ordinary oversubstitution.

[00:32:33] Speaker 05:
Well, but then its obligations are also governed by 1344C.

[00:32:36] Speaker 03:
if there's a conflict.

[00:32:38] Speaker 03:
And I don't see any conflict here between our allegations of they engaged in mismanagement and other behavior that cost our clients significant amounts of retirement money and fiduciary obligations, in fact, our core fiduciary obligations.

[00:32:52] Speaker 03:
I'd like to finish with, just by going to Judge Pillard's point of what, if you deem this to be an interlocked curriculum worthy of hearing, which question really needs to be answered, and it's just the first one.

[00:33:04] Speaker 03:
The first question is really, can the PBGC be sued at the pleading stage?

[00:33:11] Speaker 03:
for a fiduciary breach in addition to what they call benefits claims.

[00:33:15] Speaker 03:
And the answer to that is yes, under every circuit's, at the pleading stage at least, under every circuit's recent statements.

[00:33:23] Speaker 05:
Suppose we agree with you on that.

[00:33:24] Speaker 05:
Why is that the complete answer?

[00:33:26] Speaker 03:
Because then it becomes depends, as Judge Pillard said, whether we win, it depends on our actual harm, how much mismanagement there was, it really becomes a lot of factual questions.

[00:33:38] Speaker 05:
It also depends on the application of 1344C.

[00:33:42] Speaker 03:
As to the disgorgement question, as opposed to other issues associated with 100 degrees difference.

[00:33:47] Speaker 05:
Yeah, but I think you say quite firmly in your brief,

[00:33:50] Speaker 05:
The specific things you point to in, because it's claim one, that duplicate other claims are problems because they lead to this gain for the corporation.

[00:34:08] Speaker 05:
at the expense of the pilots.

[00:34:11] Speaker 03:
Well, I tried to describe other financial harms between the estimated and final benefits, which have nothing to do with those other things.

[00:34:16] Speaker 03:
And in addition, one other thing that's mentioned in the first claim is, for instance, that they whipsawed many of the pilots by giving them incomplete information so they couldn't appeal in a timely way, and then said, you're untimely.

[00:34:29] Speaker 03:
That has nothing to do with the amount of benefits at issue in two through five, but it's really a fiduciary procedural error that can only be corrected in this manner.

[00:34:37] Speaker 03:
So I think, as I mentioned, on question one, whether fiduciary breach claims can be brought in addition to all the circuits agree at the pleading stage, yes.

[00:34:48] Speaker 03:
And the Eighth Circuit in the Jones case we filed last week very recently said, and certainly in this exact factual circumstance, if the PBGC weren't a party, you could go all the way and seek even the same relief as you sought on the benefits claims and the fiduciary claims.

[00:35:04] Speaker 03:
With that, we'd ask you to affirm Judge Walton.

[00:35:07] Speaker 06:
Thank you very much.

[00:35:25] Speaker 01:
Your Honor, there's a couple of quick points.

[00:35:27] Speaker 01:
First of all, counsel's reference to

[00:35:35] Speaker 01:
1342 B3, where you agree to appointment of a trustee again.

[00:35:41] Speaker 01:
That's to the appointment of a pre-termination trustee.

[00:35:46] Speaker 01:
That didn't happen here.

[00:35:48] Speaker 01:
If you then look at 4042 C. I'm sorry, how do we know that?

[00:35:54] Speaker 01:
Because there was no trustee prior to the termination of the plan.

[00:36:02] Speaker 01:
And if you look at the language in 1342C, there it says if the corporation and the plan administrator agreed that a plan should be terminated and agreed to the appointment of a trustee without proceeding in court,

[00:36:22] Speaker 01:
that it's accomplished.

[00:36:23] Speaker 01:
So there's two similar provisions, one for the pre-termination trustee and one for the termination trustee.

[00:36:30] Speaker 02:
Why do you say that's a pre-termination trustee?

[00:36:32] Speaker 02:
He was saying that applies here where you have termination and then the appointment of a trustee.

[00:36:38] Speaker 01:
Because if you look at the appointment of trustee B, if you look at B1, it's talking about

[00:36:45] Speaker 01:
appointing a trustee to consider termination.

[00:36:48] Speaker 01:
And if you look at C, it's talking about the actual termination.

[00:36:53] Speaker 01:
And so PBGC is, and if you read the trustee agreement between Delta and PBGC, it will recite 1342 C.

[00:37:08] Speaker 01:
So that, again, there wasn't the trustee appointed under 1342B.

[00:37:16] Speaker 01:
So yes, the pilots now raise this 23-year-old Kinnick case that they didn't raise in their brief by 28J letter.

[00:37:29] Speaker 01:
And I would just point out a couple of things about Kinnick.

[00:37:32] Speaker 01:
First of all, it was addressing what happens in the pre-termination.

[00:37:39] Speaker 01:
period, not in the post-termination period.

[00:37:43] Speaker 01:
And second, it addressed what recoveries PVGC could get from someone, not what participants could get from PVGC.

[00:38:00] Speaker 02:
So in terms of what we have to decide,

[00:38:07] Speaker 02:
Given the pilot's claims that the losses from the claimed fiduciary breaches extend beyond, they would not be fully remedied by disgorgement, as I take that to be their position, then we also have to decide the question about

[00:38:26] Speaker 02:
the scope of potential fiduciary claims and or individual versus plan as plaintiff for purposes of a fiduciary claim?

[00:38:37] Speaker 01:
You could reach the individual versus plan relief issue.

[00:38:41] Speaker 01:
I think, Your Honor, that if you look at the fact that

[00:38:50] Speaker 01:
The asserted process violations, the process complaints, are about the benefit determination process.

[00:39:00] Speaker 01:
That is complete.

[00:39:01] Speaker 01:
They have their benefits.

[00:39:04] Speaker 01:
So if there isn't, under 1344C and under 1322 and 1361, if there is no disgorgement,

[00:39:17] Speaker 01:
then the only other relief is the asserted correct benefit amount that they're entitled to.

[00:39:23] Speaker 01:
They've already got that claim in counts two through six.

[00:39:29] Speaker 01:
So at that point, the fiduciary breach assertion does become duplicative because it is asking to remedy the same injury exactly.

[00:39:43] Speaker 06:
Thank you.

[00:39:43] Speaker 06:
Thank you very much.

[00:39:44] Speaker 01:
Case is submitted.