Eveleth Mines, LLC operated a taconite pellet production plant used in the production of iron and steel. In 2003, Eveleth saw a huge reduction in its business when two primary customers began purchasing taconite from other sources. In February 2003, Eveleth sent the union representing approximately 400 hourly employees a letter advising that Eveleth would permanently close its mining operation on or about May 14, 2003 due to lack of orders. In March 2003, Eveleth sent a notice to its employees that the closure was expected to be temporary, but only if pellet orders were received during the shutdown period. In May 2003, Eveleth and its subsidiaries filed for bankruptcy protection.
The Pension Benefit Guaranty Corporation (PBGC) acted to terminate the defined benefit pension plan of Eveleth to protect the plan’s financial position. When issuing a notice of benefits to plan participants, the PBGC did not include the “shutdown benefit” contained in the plan. (Shutdown benefits are a form of subsidized early retirement benefits applicable when a plant or company permanently shuts down its operations.) The PBGC had concluded that permanent shutdown benefits would result in additional $70 million in benefits, about $35 million of which would be guaranteed by the PBGC. The union challenged the PBGC determination.
The Court of Appeals for the District of Columbia Circuit upheld the PBGC’s determination. A key factor in the court’s decision was the deference to be given to the PBGC determination. The Court found that an agency’s determination would be upheld if there is relevant evidence as a reasonable mind might accept as adequate to support the agency’s finding. While the court stated that if it was making its own determination, it might find that a permanent shutdown had occurred, applying the correct legal standard of deference given to an agency determination provided evidence to support the agency’s finding. (USW v. Pension Benefit Guaranty Corporation, D.C. Cir., 2013).