On July 18, 2012, Judge Rosemary Collyer of the United States District Court for the District of Columbia denied certification of a class of 1,350 U.S. Airways pilots in an ERISA class action to recover interest on lump sum pension distributions, in a case that has been pending for more than a decade. Judge Collyer held that the named plaintiff’s exhaustion of his administrative remedies under the pension plan did not suffice for the entire class, and does not, as a matter of law, excuse the entire putative class from exhausting their administrative remedies. Therefore, the pilots’ claims could not be maintained as a class action.
Plaintiffs James Stephens and Richard Mahoney sued the PBGC for wrongful reductions in their lump sum pension benefit paid by their former employer, U.S. Airways Group, Inc. (“U.S. Airways”), before it terminated the pension plan (the “Plan”) and the PBGC took it over. Upon retirement, Mr. Stephens elected to receive a lump sum pension distribution instead of a monthly annuity payment. Mr. Stephens received the payment 45 days after he made his election. He initiated administrative proceedings arguing that he was entitled to interest on the 45-day delay. These administrative proceedings continued for approximately two years, culminating in a decision by the U.S. Airways Retirement Board denying Mr. Stephens’ administrative claim.
Plaintiffs Stephens and Mahoney moved to certify a class of former U.S. Airways pilots who were similarly affected upon retirement between January 1, 1990 and December 31, 2003 when the Plan was terminated. Plaintiffs contended that there are approximately 1,350 individuals in the proposed class. Of those, however, only Mr. Stephens exhausted his administrative remedies. Although exhaustion is generally required before seeking judicial relief, Plaintiffs argued that certification was nonetheless appropriate because as a matter of law, only one named plaintiff in a class action need exhaust his administrative remedies.
The court rejected this argument and declined to certify the class. Recognizing that other courts have held that a named plaintiff’s exhaustion of administrative remedies may suffice for an entire class, the court noted that none of those cases were binding within the District of Columbia Circuit, nor were they persuasive. Rather, the general rule is that “barring exceptional circumstances, parties aggrieved by decisions of pension plan administrators must exhaust administrative remedies available to them under their pension plans before challenging those decisions in court.” Because exhaustion is only waived in the most “exceptional circumstances” (none of which were present here), the Court held that Mr. Stephens’ exhaustion of his administrative remedies did not, as a matter of law, excuse the entire putative class from exhausting their administrative remedies.
In making their argument, Plaintiffs relied heavily on dicta in Menominee Indian Tribe of Wisconsin v. United States, 614 F.3d 519 (D.C.Cir. 2012). However, the court easily distinguished Menominee on the basis that Menominee stated “courts typically require exhaustion by at least one member of the class,” but it did not hold that only a named plaintiff need exhaust. Rather, the Court noted that Menominee merely reaffirmed the longstanding rule that if no class member has exhausted his or her administrative remedies, a class action cannot be maintained. However, the Court recognized that “Menominee did not state, and the D.C. Circuit has never held, that exhaustion by a single named plaintiff always excuses the failure to exhaust by other putative class members.”
This case illustrates that there is some divergence of opinion as to the circumstances under which exhaustion by one member of a class is sufficient to meet the exhaustion condition for the entire putative class. While it appears to be well-settled among several courts that at least one member of the class must exhaust his orher administrative remedies, it is unclear how many members of the class must exhaust in order for a class action to be maintained. Though the Court held that Mr. Stephens’ exhaustion alone did not suffice here, the opinion leaves open the question of whether all 1,350 pilots would have to exhaust before class certification would be deemed appropriate.
The case is Stephens v. U.S. Airways Group, Case. No. 07-cv-1264 (D.D.C).