Operating Engineers' Pension Trust Fund et al v. Clarks Welding And Machine et al

Filing 25

ORDER by Judge Samuel Conti denying 10 Motion to Dismiss (sclc2, COURT STAFF) (Filed on 5/8/2009)

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UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA

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OPERATING ENGINEERS' PENSION TRUST ) FUND; GIL GROSTHWAITE AND RUSS ) BURNS, as Trustees, ) ) ) Plaintiffs, ) ) v. ) ) CLARK'S WELDING AND MACHINE, a California partnership, aka ) CLARK'S WELDING, aka CLARK'S ) WELDING AND MACHINING; SYLVESTER ) HABERMAN, individually, and FRANZ ) ) EDELMAYER, individually, ) ) Defendants. ) ) I. INTRODUCTION

Case No. 09-0044 SC ORDER DENYING MOTION TO DISMISS

This matter comes before the Court on the Motion to Dismiss ("Motion") filed by Defendants Clark's Welding and Machine ("Clark's Welding"), Sylvester Haberman ("Haberman"), and Franz Edelmayer ("Edelmayer") (collectively "Defendants"). 10. Docket No.

Plaintiffs Operating Engineers' Pension Trust Fund

("Operating Engineers"), Gil Crosthwaite ("Crosthwaite"), and Russ Burns ("Burns"), as Trustees (collectively "Plaintiffs") filed an Opposition, and Defendants filed a Reply. Docket Nos. 11, 15.

For the reasons stated herein, the Motion is DENIED. Defendants also submitted a Request for Judicial Notice ("RJN"). Docket No. 8. Defendants request the Court to take

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notice of the Complaint in Case No. 03-2544 JSW, filed in this Court on May 29, 2003, the Stipulation for Dismissal filed in the same case on February 13, 2003, and the Order of Dismissal filed on March 19, 2003. See RJN Ex. A ("Walters Compl."), Ex. B The Court may take judicial notice of a

("Stipulation"; "Order").

fact that is "not subject to reasonable dispute in that it is . . . capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned." 201(b)(2). cases. 1980). Fed. R. Evid.

The Court may take notice of its own records in other

United States v. Wilson, 631 F.2d 118, 119 (9th Cir. The Court may take notice of other court proceedings that See United States ex

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have a direct relation to matters at issue.

rel. Robinson Racheria Citizens Council v. Borneo, Inc., 971 F.2d 244, 248 (9th Cir. 1992). Here, the Walters Complaint is offered so that the Court can take notice of the fact of the previous lawsuit, and the contents of the Stipulation and Order may determine whether Plaintiffs are entitled to sue. These documents are therefore directly related Also, the Court may take judicial

to the matter before the Court.

notice of these documents without converting the 12(b)(6) motion into a motion for summary judgment. See MGIC Indem. Corp. v. The Court GRANTS

Weisman, 803 F.2d 500, 504 (9th Cir. 1986). Defendants' request for judicial notice.

II.

BACKGROUND This case is not the first time Operating Engineers have sued

the Defendants.

On May 23, 2003, Ken Walters ("Walters"), and Don 2

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Doser ("Doser"), in their capacities as trustees for three pension funds, including Operating Engineers, brought an action against Defendants "seeking to enforce Defendant's [sic] obligation to contribute fringe benefits to the Trust Funds under the collective bargaining agreement." Walters Compl. at 2. About nine months

later, in February 2004, the pension funds, Clark's Welding and Edeymayer filed a Stipulation for Dismissal. See Stipulation. It

states that Clark's Welding ceased operations in July of 2003. Id. ¶ 8. Clark's Welding and Edelmayer agreed to pay the pension

funds $36,597.19, and agreed to make thirty-six (36) monthly payments of $680.89, in order to satisfy delinquent and unreported contributions to the pension funds. Stipulation states that: This Agreement embodies the entire Agreement between the parties hereto. All prior understandings and agreements by and between the parties hereto are merged into and superseded by this Agreement and no party released herein shall be bound by or liable for any statement, representation, promise, inducement or understanding of any kind or nature not set forth herein. This Agreement is the product of negotiation and preparation by and amount [sic] the parties hereto and their attorneys, if any. Therefore, the parties acknowledge and agree that this Agreement shall not be deemed to have been prepared or drafted by one party or another, and that it shall be construed accordingly. Id. ¶ 21. It also provides that: From the date of execution of this stipulation forward, to the extent that Defendant Clark's Welding and Machine and/or Franz Edel Mayer resume business under any name-style or business form, the Defendants agrees [sic] to comply with the requirements contained in Section 12.01.00 of the Collective Bargaining 3 Id. ¶¶ 12-13. The

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Agreement by submitting . . . both an Employer Report of Contributions detailing the individuals who performed work . . . , the number of covered hours worked . . . and the amount owed to the . . . [pension funds], along with a check . . . for the corresponding amount due. Id. ¶ 15. That is the only reference in the Stipulation to

Clark's Welding and Edelmayer's remaining obligations under the Collective Bargaining Agreement ("CBA"). See id. Based on the

Stipulation, the Honorable Jeffrey S. White dismissed the claims against Clark's Welding and Edelmayer. See Order.

On January 7, 2009, Plaintiffs filed their Complaint against Defendants seeking payment of withdrawal liability in the sum of $330,921. Compl., Docket No. 1, ¶ 1. Plaintiffs' suit arises

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under the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended by the Multiemployer Pension Plan Amendments Act of 1980 ("MPPAA"), 29 U.S.C. §§ 1001-1461. Id. The Complaint

alleges that Defendants withdrew from participation in the Operating Engineers' Pension Trust Fund in January 2003, and that Plaintiffs notified Defendants of the assessed withdrawal liability on June 26, 2008. Id. ¶¶ 1, 10, 11. On October 10,

2008, Plaintiffs notified Defendants they would be in default if they failed to cure nonpayment within sixty days. Id. ¶ 14. The

Complaint alleges that Defendants have not made any withdrawal liability payments. Id. ¶ 15. Defendants move to dismiss the Mot. at 1.

Complaint based on the terms of the Stipulation.

III. LEGAL STANDARD A Federal Rule of Civil Procedure 12(b)(6) motion to dismiss 4

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tests the sufficiency of the complaint.

Dismissal pursuant to

Rule 12(b)(6) is appropriate if the plaintiff is unable to articulate "enough facts to state a claim to relief that is plausible on its face." 1955, 1974 (2007). Bell Atl. Corp. v. Twombly, 127 S. Ct.

For purposes of such a motion, the complaint

is construed in the light most favorable to the plaintiff and all properly pleaded factual allegations are taken as true. Jenkins

v. McKeithen, 395 U.S. 411, 421 (1969); Everest & Jennings, Inc. v. Am. Motorists Ins. Co., 23 F.3d 226, 228 (9th Cir. 1994). All

reasonable inferences are to be drawn in favor of the plaintiff. Id.

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IV.

DISCUSSION A. No Requirement to Arbitrate

Defendants contend that Plaintiffs' claim for withdrawal liability against Clark's Welding and Edelmayer should be dismissed because "the Stipulated Settlement absolved them from any liability related to their obligations to . . . [Operating Engineers] in the event of withdrawal." Mot. at 6. Plaintiffs

respond that Defendants' Motion is improper because any dispute concerning a determination of withdrawal liability must be resolved through arbitration. Opp'n at 6. Plaintiffs contend

that by failing to demand arbitration, Defendants waived their right to raise affirmative defenses, and the Plaintiffs' assessment of withdrawal liability is now final and binding on Defendants. Id. at 7.

Under ERISA, as amended by the MPPAA, an employer who 5

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withdraws from an underfunded pension plan is required to pay "withdrawal liability," an amount equal to that employer's pro rata share of the plan's unfunded vested benefits, subject to certain adjustments. 29 U.S.C. §§ 1381, 1391. Section 1401(a)(1)

of ERISA provides: "Any dispute between an employer and the plan sponsor of a multiemployer plan concerning a determination made under sections 1381 through 1399 of this title shall be resolved through arbitration." Id. § 1401(a)(1). "If no arbitration

proceeding has been initiated . . . the amounts demanded by the plan sponsor under section 1399(b)(1) of this title shall be due and owing on the schedule set forth by the plan sponsor. The plan

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sponsor may bring an action in a State or Federal court of competent jurisdiction for collection." Id. § 1401(b)(1).

Defendants do not dispute that they failed to initiate arbitration. See Reply at 1. Instead, Defendants contend that

the question of whether the Stipulation released them from withdrawal liability is not a dispute concerning a determination made under sections 1381 through 1399 of ERISA, and therefore they were not required to submit the issue to an arbitrator. 3-11. The Court finds that Defendants were not required to initiate arbitration. The central issue here is whether the February 2004 See id at

Stipulation released Defendants from withdrawal liability such that Plaintiffs were not entitled to seek such payments over four years later on June 26, 2008. Disputes that have to be arbitrated

concern "the establishment, computation and collection of withdrawal liability." Shelter Framing Corp. v. Pension Benefit 6

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Guar. Corp., 705 F.2d 1502, 1509 (9th Cir. 1983), rev'd on other grounds, 467 U.S. 717 (1984). Disputes concerning the

establishment of withdrawal liability turn on whether the employer's conduct constitutes a complete or partial withdrawal from a pension plan. See 29 U.S.C. § 1381; see also Teamsters

Pension Trust Fund-Bd. of Trustees of the W. Conference v. Allyn Transp. Co., 832 F.2d 502, 505-06 (9th Cir. 1987). In Board of Trustees of Trucking Employees of North Jersey Welfare Fund, Inc. v. Centra, the Third Circuit determined that the issue of whether there had been a breach of a settlement agreement did not fall into any of the categories that the MPPAA deems arbitrable. 983 F.2d 495, 506-07 (3d Cir. 1992)("Centra").

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In In re Centric Corp., the Tenth Circuit determined that the defense of laches was not barred by a failure to arbitrate. F.2d 1514, 1518-19 (10th Cir. 1990). 901

The Tenth Circuit noted that

"[g]enerally . . . the only defenses which are waived by a failure to timely initiate arbitration are those which go to the merits of the liability assessment itself." Id. at 1518.

Here, the Court finds that the question of whether the Stipulation releases Defendants from the requirement to pay withdrawal liability is not an issue concerning the establishment, computation or collection of withdrawal liability. This question

does not go to the merits of the withdrawal liability assessment itself, but instead raises the issue of whether Operating Engineers are entitled to seek such payments from the Defendants and to sue them for failing to pay. Therefore, Defendants did not

waive the right to defend themselves by failing to arbitrate the 7

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issue of whether the Stipulation releases them from liability. The Court finds that the Report and Recommendation of Magistrate Judge Eaton, in I.L.G.W.U. National Retirement Fund v. W. Helena-Helena Sportswear, Inc., No. 96-1007, 1996 U.S. Dist. LEXIS 20635 (S.D.N.Y. July 25, 1996)("West-Helena"), is distinguishable. In that case, the fund sent the employer a

notice of withdrawal liability less than one month after the parties entered into a settlement agreement releasing the defendants from further liability for delinquent contributions. Id. at *6-7. Magistrate Judge Eaton determined that the employer

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was precluded from asserting a defense based on the effect of the settlement agreement because the employer failed to initiate arbitration or sue for injunctive or declaratory relief within the sixty-day deadline required by the MPPAA. Id. at *11-12.

Magistrate Judge Eaton took note of the Second Circuit's determination that: Congress intended that disputes over withdrawal liability would be resolved quickly, and established a procedural bar for employers who failed to arbitrate disputes over withdrawal liability . . . in a timely manner . . . . If a party wishes to seek judicial resolution of its dispute without first submitting to arbitration it should seek declaratory and/or injunctive relief against the imposition of withdrawal liability . . . . The failure to seek such relief on a timely basis may, in some instances, lead to a harsh result, but the harshness of the default is largely "a self-inflicted wound." Id. at *14-15 (citations and italics omitted)(quoting I.L.G.W.U. Nat'l Ret. Fund v. Levy Bros. Frocks, 846 F.2d 879, 887 (2d Cir. 1988)). Relying on this reasoning, Magistrate Judge Eaton 8

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determined that "the defendants chose to delay, do nothing and force the Fund to sue. As a result, the defendants must suffer Id. at *18.

the 'self-inflicted wound' of default."

Here, despite the fact that Clark's Welding withdrew from the fund in early to mid 2003, Operating Engineers waited until June 2008 to notify Defendants of its assessment of withdrawal liability. Hence, to the extent there are concerns in this case

about timely resolution of withdrawal liability disputes, Operating Engineers would appear to be more culpable than Defendants. Furthermore, the court, in West Helena, determined

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that there was no unfairness in enforcing the arbitration requirement because it was "totally unreasonable" for the employer to contend that a release for delinquent contributions included withdrawal liability. 1996 U.S. Dist. LEXIS 20635, at *24-29.

Here, by contrast, the release language in the Stipulation is broad. The Stipulation states "no party released herein shall be

bound by or liable for any statement, representation, promise, inducement or understanding of any kind or nature not set forth herein." Stipulation ¶ 21. The Defendants can reasonably contend

that this language was intended to include a release of withdrawal liability. Finally, the Court notes that Magistrate Judge Eaton

did not consider the Third Circuit's determination, in Centra, that questions concerning the validity and effect of a prior settlement agreement do not have to be submitted to an arbitrator. See 983 F.2d at 506-07. The Court concludes Defendants were not

required to initiate arbitration. /// 9

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B.

Stipulation for Dismissal and Release of Liability

Based on the parties' submissions, the Court is unable to conclude the Complaint should be dismissed. Defendants' contend

the Stipulation absolves them from any liability related to their obligations in the event of withdrawal from the pension fund. Mot. at 7-10. The Stipulation states, "[a]ll prior understandings

and agreements by and between the parties hereto are merged into and superseded by this Agreement and no party released herein shall be bound by or liable for any statement, representation, promise, inducement or understanding of any kind or nature not set forth herein." Stipulation ¶ 21.

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Defendants contend that at the time Operating Engineers signed the Stipulation in February 2004 they were aware Clark's Welding had withdrawn from the pension fund. See Mot. at 6. In

the Stipulation, Defendants represented that Clark's Welding ceased operations in July of 2003. Stipulation ¶ 8. In the

Complaint, Plaintiffs allege that Defendants withdrew from participation in the fund on or about January 2003. 10. Compl. ¶¶ 1,

Defendants point out that the Stipulation contains only one

provision maintaining Clark's Welding and Edelmayer's liability to Plaintiffs under the CBA, and that provision only takes effect to the extent they resume business. See Mot. at 9; Stipulation ¶ 15.

Since the Stipulation contains an integration clause, broad release language, one provision maintaining an obligation to resume contribution payments, and no mention of withdrawal liability, Defendants contend it absolves them of any obligation to pay withdrawal liability. Mot. at 7-10. 10

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Although Defendants' contentions are certainly reasonable, they are not sufficient to warrant dismissing the Complaint. In

Centra, the settlement agreement released the parties from all claims "including but not limited to the claim for withdrawal liability." clear. 983 F.2d at 499 n.4. Here, the Stipulation is not as

Without more, the Court cannot conclude that the release

of liability for "any statement, representation, promise, inducement or understanding" includes a release for withdrawal liability. This broad release may extend to withdrawal liability,

but the lack of any mention of withdrawal liability could also mean that the Stipulation was not meant to extend that far. Similarly, the fact that the Stipulation contains one provision maintaining Defendants' liability for contributions could mean that the Defendants were released from all other forms of liability, but it could also mean that the settlement was limited to liability for unpaid contributions. At this stage of the proceedings, any ambiguity in the documents must be resolved in Plaintiff's favor. See Int'l

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Audiotext Network, Inc. v. AT&T Co., 62 F.3d 69, 72 (2d Cir. 1995). A suit should not be dismissed if it is possible to

hypothesize facts, consistent with the complaint, that would make out a claim. Graehling v. Vill. of Lombard, III, 58 F.3d 295, 297 The Court notes that, under California law,

(7th Cir. 1995).

parties can introduce extrinsic evidence to prove a meaning to which the language of an agreement is reasonably susceptible. Pac. Gas & Elec. Co. v. G. W. Thomas Drayage & Rigging Co., 69 Cal. 2d 33, 37 (1968). Extrinsic evidence concerning the parties' 11

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intentions is likely to clear up this ambiguity concerning whether the release language in the Stipulation extends to withdrawal liability. The terms of the Stipulation, by themselves, do not

warrant dismissing the Complaint. C. Waiver

Defendants argue that Plaintiffs waived their right to bring this suit because Plaintiffs were aware of Defendants' withdrawal from the fund before entering into the Stipulation, Plaintiffs "expressly superseded any such [withdrawal] liability with the settlement," Plaintiffs led Defendants to believe that the Stipulation satisfied all of Defendants' obligations to the fund, and Plaintiffs did not notify Defendants of their intention to seek withdrawal penalties until June 26, 2008. Mot. at 10-11.

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While the Court is certainly troubled by Plaintiffs' delay in seeking withdrawal liability, Defendants' waiver argument depends on construing the Stipulation as releasing Defendants from withdrawal liability. As explained above, the Court cannot make

that determination based on the parties' submissions at this early stage of the proceedings. Therefore, the Court cannot dismiss the Also, since the Court

Complaint based on this waiver argument.

cannot conclude that Clark's Welding is absolved of withdrawal liability, the Court need not reach Defendants' argument that no liability can rest on an individual partner when the partnership has been absolved of liability for the same conduct. 11-13. /// /// 12 See Mot. at

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V.

CONCLUSION For the reasons stated above, the Court DENIES Defendants'

Motion to Dismiss.

IT IS SO ORDERED.

Dated: May 8, 2009 UNITED STATES DISTRICT JUDGE

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