Stephens v. U.S. Airways Grp., Inc., Civil Action No. 07–1264 (RMC).

908 F.Supp.2d 10

James C. STEPHENS, et al., Plaintiffs,

v.US AIRWAYS GROUP, INC., et al., Defendants.

Civil Action No. 07–1264 (RMC).

United States District Court, District of Columbia.

Dec. 7, 2012.

Robert P. Trout, Trout Cacheris, PLLC, Washington, DC, Jacks C. Nickens, Nickens Keeton Lawless Farrell & Flack LLP, Houston, TX, for Plaintiffs.

Karen M. Wahle, O'Melveny & Myers, LLP, New York, N.Y. Israel Goldowitz, Mark R. Snyder, Pension Benefit Guaranty Corporation, Washington, DC, for Defendants.

OPINION ON CLASS CERTIFICATION

ROSEMARY M. COLLYER, District Judge.

Plaintiffs James C. Stephens and Richard Mahoney, former pilots for U.S. Airways, ask the Court to certify a class of former pilots who received delayed distributions of their lump-sum retirement benefits. As part of a bankruptcy proceeding, U.S. Airways terminated the pension plan in 2003, and it was assumed by the Pension Benefit Guaranty Corporation under the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq. The PBGC contends that no pilot can claim a payment for interest on a delayed distribution unless he or she first exhausted administrative remedies. Concededly, only Mr. Stephens did so. This Court agrees and will deny class certification.

I. FACTS

This case came to this Court by way of the District Court for the Northern District of Ohio and the Sixth Circuit. This Court dismissed the pilots' claims in part, 555 F.Supp.2d 112 (D.D.C.2008), then granted summary judgment to the PBGC on the remaining claims, 696 F.Supp.2d 84 (D.D.C.2010). The case also has been to the D.C. Circuit and back. Stephens v. U.S. Airways Group, Inc., 644 F.3d 437 (D.C.Cir.2011). Before the D.C. Circuit, the question was the propriety of U.S. Airways's practice of taking forty-five days to calculate and issue the lump-sum retirement payments due to pilots under their Retirement Plan. See Stephens, 644 F.3d at 439–40. The controlling opinion of the D.C. Circuit rejected the pilots' argument that the forty-five day delay violated the ERISA requirement that lump-sum payments be the “actuarial equivalent” of an annuity payment, as set forth in 29 U.S.C. § 1054(c)(3).¹Stephens, 644 F.3d at 440.

Notwithstanding the absence of an ERISA violation, the D.C. Circuit held that the necessary inquiry is whether Plaintiffs are entitled to interest from the delay, which is determined by “whether [US Airways's] 45–day delay was reasonable.” Id. To resolve that question, the controlling opinion relied on an Internal Revenue Service regulation, 26 C.F.R. § 1.401(a)–20 (Question & Answer 10(b)(3)). Id. That provision clarifies the term “annuity starting date” as used in 26 U.S.C. § 401(a)(11)(A) and provides that “[an annuity] payment shall not be considered to occur after the annuity starting date merely because actual payment is reasonably delayed for calculation of the benefit amount if all payments are actually made.” 26 C.F.R. § 1.401(a)–20 (Question & Answer 10(b)(3)). Applying the IRS regulation, the D.C. Circuit held that U.S. Airways's forty-five day delay was “not ‘reasonable’ ” because it was “unrelated to the administrative calculation of Plaintiffs' lump sum benefits” and did not “correspond to administrative necessity.” Id. at 441. Because the payment was unreasonably delayed, Mr. Stephens and Mr. Mahoney are entitled to interest, and the D.C. Circuit remanded the case to this Court “to calculate the appropriate amounts.” Id. at 441–42. The circuit court did not expressly state how much of U.S. Airways's delay should be considered reasonable on remand. Judge Brown observed, however, that “calculation of a lump sum payment took at most 21 business days” or “approximately one calendar month,” which supports the conclusion that such delay would “correspond to administrative necessity” and be reasonable, even if the extra fifteen or so days would not be. Id. at 440–41.

On remand, Mr. Stephens and Mr. Mahoney press their rights to a plaintiff class pursuant to Federal Rule of Civil Procedure 23(b)(3). Plaintiffs' first motion for class certification, which derived from the Third Amended Complaint, was denied without prejudice on July 18, 2012. See Order [Dkt. 54]. The Court made three conclusions of law in denying the first class certification motion. First, because Plaintiffs conceded that Mr. Stephens was the only member of the putative class who exhausted administrative remedies, the Court held that “exhaustion of [Mr. Stephen's] administrative remedies [as a named plaintiff] does not, as a matter of law, excuse the entire putative class from exhausting their administrative remedies.” Id. at 3–6. Second, even assuming arguendo that exhaustion would be excused where the putative class's allegations were based on statutory violations as opposed to the Plan's administration, exhaustion would not be excused because the Plaintiffs challenged “the administration of the [US Airways Retirement] Plan and not just the legality of the Plan” in the Third Amended Complaint. Id. at 6–7 (citing Kifafi v. Hilton Hotel Ret. Plan, Civ. No. 98–1517, 2004 WL 3619156, at *5 (D.D.C. Sept. 27, 2004)). Finally, as to Plaintiffs' argument that exhaustion of administrative remedies should be excused because it would have been futile, the Court held that “[a]t most, Plaintiffs' claim of futility would apply only to those pilots who failed to pursue administrative remedies after Mr. Stephens' administrative denial on March 8, 1999.” Id. at 7–8.

Plaintiffs filed their Fourth Amended Class Action Complaint on August 30, 2012. See [Dkt. 60]. The class they seek to certify is defined as:

All participants and/or beneficiaries of the Retirement Income Plan for Pilots of U.S. Air Inc., who, from February 28, 1997, to March 31, 2003, elected to receive a lump-sum payment as a full or partial distribution of their retirement benefits, but who did not receive their lump-sum payment on the first day of the month coinciding with or following their Normal Retirement Date (or alternatively, for early retirees, the date on which they elected to begin receiving their retirement income).

Id. ¶ 10. On October 2, 2012, Plaintiffs filed their Second Motion for Class Certification, Dkt. 61, which PBGC opposes, Dkt. 64 (“Def. Opp.”).

II. LEGAL STANDARD

Federal Rule of Civil Procedure 23(a) requires a class to satisfy four criteria before certification: 1) numerosity, so that joinder of all persons would be impractical; 2) commonality of questions of law and fact; 3) typicality of named parties' claims and defenses to the members of the class; and 4) adequacy of representation of the class by the named parties and counsel. Fed.R.Civ.P. 23(a); Amchem Prod., Inc. v. Windsor, 521 U.S. 591, 614, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997). Additionally, plaintiffs must demonstrate that a class is maintainable under Rule 23(b)(1), (2), or (3). Amchem Prod., 521 U.S. at 614, 117 S.Ct. 2231. Plaintiffs rely on Rule 23(b)(3), see Second Motion for Class Certification at 1, which provides for class certification if “the court finds that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.”

III. DISCUSSION

As described, the class would encompass at least 650 former U.S. Airways pilots and would satisfy the numerosity requirement. See Lindsay v. Gov't Emps. Ins. Co., 251 F.R.D. 51, 55 (D.D.C.2008) (“Typically, a class in excess of 40 members is sufficiently numerous to satisfy [the numerosity] requirement.”). Without discovery or a trial, the Court credits the factual allegations in the Amended Complaint and would find sufficient commonality because U.S. Airways had a regular practice of paying lump sum distributions on the forty-fifth day after the benefit commencement date. See Taylor v. D.C. Water & Sewer Auth., 241 F.R.D. 33, 37 (D.D.C.2007) (“The commonality test is met when there is at least one issue, the resolution of which will affect all or a significant number of the putative class members.” (quoting Coleman v. Pension Benefit Guar. Corp., 196 F.R.D. 193, 198 (D.D.C.2000) (internal quotation marks omitted))). Further, there is no argument that Messrs. Stephens and Mahoney, via counsel, could fairly and adequately represent the class. See Lindsay, 251 F.R.D. at 55 (“A proposed representative is ‘adequate’ if (1) his interests do not conflict with those of other class members, and (2) he will vigorously prosecute the interests of the class through qualified counsel.” (citation omitted)).

The issue in this case is the third class action requirement, typicality. See Def. Opp. at 4 (“Plaintiffs forthrightly concede that Mr. Stephens is the only individual who exhausted his administrative remedies under the Plan, and that no other pilot who received a lump sum before or after did so. For this reason, all other putative class members are precluded from bringing suit....”). As to the question of what would have been a “reasonable” period of time to calculate and distribute lump sum benefits, Mr. Stephens presents a typical claim. The trouble is that Mr. Stephens is the only member of the putative class who exhausted his administrative remedies, as Plaintiffs concede.²See Pl. Mem. Supp. Second Mot. Class Cert. [Dkt. 62] (“Pl. Mem.”) at 6–7. Thus, Mr. Stephens's case is in a drastically different posture from the cases of other putative plaintiffs as to a potentially dispositive affirmative defense asserted by the PBGC. See7A Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1006 (3d ed.) (noting that the typicality requirement may not be met when “the legal or factual position of the representatives is markedly different from that of other members of the class even though common issues of law or fact are present”).

Plaintiffs assert that this difference is not legally significant for two...