Cases & Deals

Mining company overturns withdrawal liability award in D.C. Circuit

Client(s) Energy West Mining Company

The D.C. Circuit reversed a judgment against Energy West Mining Company, agreeing with Jones Day's position that the $115 million withdrawal liability assessment had been calculated using a legally impermissible discount rate. This was the second appellate court to adopt Jones Day’s argument, following the Sixth Circuit in 2021. Jones Day also won the first district court decision on this issue in 2018, on behalf of the New York Times Company.

When an employer withdraws from a multiemployer pension plan, ERISA requires that employer to pay withdrawal liability: its allocable share of the plan's unfunded vested benefits. In this case, the pension plan actuary used a risk-free discount rate to measure the present value of those liabilities, instead of the 7.5% investment return rate that the actuary actually expected the plan’s investments to earn. That had the effect of nearly tripling Energy West's liability. A unanimous D.C. Circuit panel held that this contradicted the statute, which requires assumptions that represent the actuary's "best estimate" of the plan’s "anticipated experience." Discount rates must therefore be "based on the plan’s actual anticipated investment experience," the panel concluded. For that reason, the court reversed the district court decision and ordered vacatur of the arbitration award that had upheld the plan’s assessment.

The D.C. Circuit's decision solidifies a trend rejecting the use of risk-free discount rates by multiemployer pension plans as a means of inflating withdrawal liability.

United Mine Workers of America 1974 Pension Plan et al. v. Energy West Mining Co., No. 20-7054 (D.C. Cir.)