A federal appeals court on Tuesday ordered dismissal of a lawsuit that US Airways pilots filed against a federal agency in a fight over pension benefits, saying the claims must be pursued through administrative channels.
In a 3-0 ruling, the U.S. Court of Appeals for the District of Columbia Circuit sent the case back to a lower federal court with instructions to dismiss the pilots' suit against the Pension Benefit Guaranty Corp., the federal agency that backs private pension plans. Without ruling on the merits of the case, the appeals court said the November 2003 suit must be thrown out "because the pilots have not yet exhausted their administrative remedies."
The pilots, in the suit, contended that the pension agency had made errors in calculating the pension benefits due them under federal law after US Airways Group Inc., the nation's fifth-largest airline, filed its first bankruptcy in August 2002.
The airline, which has filed for bankruptcy protection from creditors twice in two years, terminated the pilots' defined-benefit pension plan in March 2003. That caused a sharp drop in benefits for many US Airways pilots because the airline's plan would have provided significantly more money than what is guaranteed by the PBGC.
A number of big U.S. airlines are or have been in bankruptcy reorganization, and airline employee pensions are a contentious issue. United Airlines also used bankruptcy to slash costs by dumping its employee pension liabilities onto the PBGC, which was created in 1974 as a government insurance program for traditional employer-paid pension plans.
Companies pay insurance premiums to the agency, and if an employer can no longer support its pension plan, the agency takes over the assets and liabilities and pays promised benefits to retirees - up to certain limits under the law.
The US Airways pilots contended in the suit, which also named the airline, that the PBGC had made several errors in calculating their pension benefits. The agency began paying the retired pilots estimated benefits when it took over the pension plan in March 2003, without having formally determined each pilot's benefits, as is its practice.
The pilots filed the suit "without waiting for the PBGC to complete its final determinations," the appeals court said in the ruling written by Appeals Court Judge Merrick Garland.
The agency subsequently corrected some of the alleged errors, the ruling noted.
In going through administrative channels, decisions on the pilots' case would be made by the pension agency itself and administrative law judges there.
US Airways, based in Tempe, Ariz., was acquired by America West Airlines last September in a deal that allowed US Airways to emerge from bankruptcy for the second time in three years. The carrier, which retained the US Airways name, bills itself as the world's largest low-fare airline.
The pilots' case against US Airways was put on hold as a result of its bankruptcy filing.
Spokesmen for the pilots and the PBGC didn't immediately return telephone calls seeking comment.
On the Net:
US Airways Group Inc.: http://www.usairways.com
Pension Benefit Guaranty Corp.: http://www.pbgc.gov
Court of Appeals for the District of Columbia Circuit: http://www.cadc.uscourts.gov/internet/internet.nsf
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