Hawaii Laborers' Trust Funds et al v. IGD Hospitality, Inc. et al

Filing 22

ORDER GRANTING MOTION TO DISMISS COUNTERCLAIM re 11 - Signed by CHIEF JUDGE SUSAN OKI MOLLWAY on 12/13/13. "IGD is given leave to file an amended Counterclaim no later than December 27, 2013." (emt, )CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
HAWAII LABORERS’ TRUST FUNDS; )
et al.,
)
)
Plaintiffs/Counterclaim )
Defendants,
)
)
vs.
)
)
IGD HOSPITALITY INC.,
)
)
Defendant/Counterclaim
)
Plaintiff.
)
_____________________________ )
IGD HOSPITALITY INC.,
)
)
Defendant/Third Party
)
Plaintiff,
)
)
vs.
)
)
LABORERS’ INTERNATIONAL UNION )
OF NORTH AMERICA LOCAL 368;
)
et al,
)
)
Third Party Defendants. )
_____________________________ )

CIVIL NO. 13-00320 SOM/KSC
ORDER GRANTING MOTION TO
DISMISS COUNTERCLAIM

ORDER GRANTING MOTION TO DISMISS COUNTERCLAIM
I.

INTRODUCTION.
On June 27, 2013, Plaintiff Hawaii Laborers’ Trust

Funds (“the Trust Funds”) filed a Complaint in this court against
Defendant IGD Hospitality, Inc., alleging that IGD had failed to
pay employee benefits owed under the terms of a collective
bargaining agreement between IGD and the Laborers’ International
Union of North America, Local 368, AFL-CIO (“the Union”).

In

response, IGD filed a Counterclaim against the Trust Funds and a

Third-Party Complaint against the Union, alleging that the Union
and the Trust Funds had conspired to misclassify workers they
sent to IGD for a construction project, and that this
misclassification led to overpayment of both wages and employee
benefits.
The only issue before the court on the present motion
is the sufficiency of IGD’s Counterclaim against the Trust Funds.
Because IGD’s allegations go only to conduct on the part of the
Union and of a certain trustee who is not alleged to have been
acting in a trustee capacity, almost all of IGD’s allegations
against the Trust Funds fail to state a claim.

The only claim

IGD brings for which the lack of specific allegations against the
Trust Funds is not fatal is the claim for unjust enrichment; that
claim is predicated on the allegedly wrongful retention of a
benefit, not on wrongful conduct by the Trust Funds.

However,

IGD’s claim for unjust enrichment, whether characterized as one
under state law or federal common law, is preempted by the
Employee Retirement Income Security Act (“ERISA”).

The court

therefore grants the Trust Funds’ motion to dismiss all claims
asserted in IGD’s Counterclaim.
II.

BACKGROUND
On May 2, 2012, IGD entered into a collective

bargaining agreement with the Union that incorporated a Master
Labor Agreement (“MLA”) for Hawaii’s construction industry and

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various agreements creating the Trust Funds.
No. 1.

Complaint ¶ 6, ECF

The MLA sets forth the hourly wage and benefits

contributions that an employer must pay to workers when they are
performing work covered by the MLA.

Id.

Workers are

categorized, based on their skill and experience level, as
“Laborer 1," “Laborer 2,” or “Apprentice.”
No. 6-1.

Counterclaim ¶ 8, ECF

The amount an employer owes in wages and benefits

varies with the category of worker it hires on a particular
project.

Id.

For example, for a “Laborer 2," an employer must

pay a wage of $28.70 per hour and benefit contributions of $16.28
per hour.

Id. ¶ 11.

However, for an “Apprentice,” the employer

must pay an hourly wage of only $15.15, and is obligated to pay
Health and Welfare benefits amounting to only $5.60 into the
Trust Funds.

Id. ¶ 14.

IGD states that an “Apprentice” seeking

to become qualified as a “Laborer 2" is required to successfully
complete an evaluation course, have a minimum of 145 hours of
class room instruction, and have “2 years/4000 hours of on-thejob training.”

Opp. at 5, ECF No. 15.

In September 2012, IGD entered into a contract with a
construction firm to perform renovations of a hotel on Maui.
Counterclaim ¶ 4, ECF No. 6-1.

The project used Union labor, and

it appears that it was the Union’s responsibility to send IGD
construction workers of a particular classification when
requested.

Id. ¶¶ 9-10.

IGD alleges that the Union, through

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Leimomi Johnson--the Union’s Field Representative and Organizer
on Maui, id. ¶ 9--provided IGD with workers who had “no prior
work experience, no training, and no classroom instruction, or
work certifications,” and “purposefully misrepresented” them as
being in the Laborer 2 category when, at most, they should have
been in the Apprentice category.

Id. ¶¶ 15, 40.

IGD alleges

that there were approximately forty misclassified workers on the
renovation project.

Id. ¶ 35.

IGD further alleges that Johnson approached painters
and flooring workers employed on the hotel renovation who were
members of other unions and told them that “if they paid the
Union a $600.00 membership fee, [] they could become Union
members and [be] hired back on the same [p]roject . . . at rates
significantly higher . . . [than] they were receiving from IGD
under the current pay scale at their present unions.”

Id. ¶ 16.

IGD alleges that, after this fee was paid, the painters and
flooring workers were also put by the Union in the Laborer 2
category and placed in construction roles they were unqualified
for.

Id. ¶ 21.
IGD alleges that many of the assigned workers “could

not perform the job duties for [their] classification,” id. ¶ 22,
and that these workers, upon questioning, admitted that Johnson
had never inquired about their qualifications.

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Id. ¶ 29.

IGD

states that, upon discovering their lack of qualifications, it
terminated the allegedly misclassified workers.

Id. ¶ 33.

IGD alleges that “the Trust Funds knew about this
misclassification by the Union and conspired with the Union to
condone [it].”

Id. ¶ 45.

IGD claims that it “reasonably relied upon the Union’s,
the Trust Funds’, and Johnson’s representations [regarding worker
classification] . . . in making [] contributions to the Trust
Funds.”

Id. ¶ 41.

IGD alleges further that, had the

misclassified workers been properly designated, the only benefits
“the Trust Funds would be entitled to assess and collect from IGD
would be the Health and Welfare benefit.” Id. ¶ 42.

Thus, IGD

alleges that “misrepresentation, and fraud by the Union (in
collaboration with the Trust Funds), has resulted in a gross over
statement and overpayment . . . to the Trust Funds of
contributions and benefits.”

Id. ¶ 43.

As a result, IGD

maintains that it, rather than the Trust Funds, is owed
restitution under the contract.
III.

JURISDICTION.
This court has jurisdiction over the Trust Fund’s

deficient payment claims under ERISA’s civil enforcement
provisions,

29 U.S.C. 1132(e), and has jurisdiction over IGD’s

RICO counterclaim under 18 U.S.C. § 1964(a).

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This court

exercises supplemental jurisdiction over IGD’s state law
counterclaims.
IV.

See 28 U.S.C. § 1367.

RULE 12(b)(6) STANDARD.
Under Rule 12(b)(6) of the Federal Rules of Civil

Procedure, review is generally limited to the contents of a
complaint.

Sprewell v. Golden State Warriors, 266 F.3d 979, 988

(9th Cir. 2001); Campanelli v. Bockrath, 100 F.3d 1476, 1479 (9th
Cir. 1996).

If matters outside the pleadings are considered, the

Rule 12(b)(6) motion is treated as one for summary judgment.

See

Keams v. Tempe Tech. Inst., Inc., 110 F.3d 44, 46 (9th Cir.
1997); Anderson v. Angelone, 86 F.3d 932, 934 (9th Cir. 1996).
However, courts may “consider certain materials--documents
attached to the complaint, documents incorporated by reference in
the complaint, or matters of judicial notice--without converting
the motion to dismiss into a motion for summary judgment.”
United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003).
Documents whose contents are alleged in a complaint and whose
authenticity is not questioned by any party may also be
considered in ruling on a Rule 12(b)(6) motion to dismiss.

See

Branch v. Tunnell, 14 F.3d 449, 453-54 (9th Cir. 1994).
On a Rule 12(b)(6) motion, all allegations of material
fact are taken as true and construed in the light most favorable
to the nonmoving party.

Fed’n of African Am. Contractors v. City

of Oakland, 96 F.3d 1204, 1207 (9th Cir. 1996).

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However,

conclusory allegations of law, unwarranted deductions of fact,
and unreasonable inferences are insufficient to defeat a motion
to dismiss.

Sprewell, 266 F.3d at 988; In re Syntex Corp. Sec.

Litig., 95 F.3d 922, 926 (9th Cir. 1996).

The court need not

accept as true allegations that contradict matters properly
subject to judicial notice or allegations contradicting the
exhibits attached to the complaint.

Sprewell, 266 F.3d at 988.

Dismissal under Rule 12(b)(6) may be based on either:
(1) lack of a cognizable legal theory, or (2) insufficient facts
under a cognizable legal theory.

Balistreri v. Pacifica Police

Dept., 901 F.2d 696, 699 (9th Cir. 1988) (citing Robertson v.
Dean Witter Reynolds, Inc., 749 F.2d 530, 533-34 (9th Cir.
1984)).
“[T]o survive a Rule 12(b)(6) motion to dismiss,
factual allegations must be enough to raise a right to relief
above the speculative level, on the assumption that all the
allegations in the complaint are true even if doubtful in fact.”
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)) (internal
quotation marks omitted); accord Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (“the pleading standard Rule 8 announces does not
require ‘detailed factual allegations,’ but it demands more than
an unadorned, the-defendant-unlawfully-harmed-me accusation”).
“While a complaint attacked by a Rule 12(b)(6) motion to dismiss
does not need detailed factual allegations, a plaintiff’s

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obligation to provide the ‘grounds’ of his ‘entitlement to
relief’ requires more than labels and conclusions, and a
formulaic recitation of the elements of a cause of action will
not do.”

Twombly, 550 U.S. at 555.

The complaint must “state a

claim to relief that is plausible on its face.”

Id. at 570.

“A

claim has facial plausibility when the plaintiff pleads factual
content that allows the court to draw the reasonable inference
that the defendant is liable for the misconduct alleged.”

Iqbal,

556 U.S. at 677.
V.

ANALYSIS.
Although IGD’s Counterclaim does not clearly set forth

IGD’s claims, the parties appear to agree that the following
violations are alleged: fraud and intentional misrepresentation;
breach of contract; tortious inference with business and
employment relations; civil conspiracy; unfair and deceptive
trade practices; racketeering in violation of the federal RICO
statute; unjust enrichment; negligence, contributory negligence,
and gross negligence; abuse of process; extortion; malicious
prosecution; harassment; breach of fiduciary duty; and breach of
covenant of good faith and fair dealing.

In its opposition to

the Trust Funds’ motion to dismiss the Counterclaim, IGD agrees
to voluntarily withdraw its claims for malicious prosecution and
harassment, and the court therefore deems those claims dismissed.
Opp. at 28, ECF No. 15.

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A.

All Claims Predicated on the Trust Funds’ Role in
the Misclassification of Workers Fail to State a
Claim.

Aside from IGD’s unjust enrichment count, all of IGD’s
claims require it to allege some wrongful conduct on the part of
the Trust Funds.

The gravamen of the Counterclaim is the alleged

conspiracy between the Union and the Trust Funds to misclassify
workers, and thereby overcharge IGD.

However, IGD does not

allege a single fact that implicates the Trust Funds qua Trust
Funds.

Instead, IGD’s allegations relate exclusively to the

conduct of Johnson, acting in her capacity as Field Organizer for
the Union.

The Ninth Circuit has been unequivocally clear that,

“As a matter of federal law, a union and its representatives are
not agents of a trust fund created by a collective bargaining
agreement.

Trust authorities set up pursuant to section 302 of

the LMRA have long been held to constitute a distinct and
independent entity separate from the union that negotiates the
collective bargaining agreement establishing a trust.”

Operating

Engineers Pension Trust v. Cecil Backhoe Serv., Inc., 795 F.2d
1501, 1507 (9th Cir. 1986).

See also Waggoner v. Dallaire, 649

F.2d 1362, 1368 (9th Cir. 1981) (“Trust authorities set up
pursuant to section 302 of the LMRA have long been held to
constitute a distinct and independent entity separate from the
union that negotiates the collective bargaining agreement
establishing a trust. . . .

Moreover, all funds in trust must be

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used for the sole and exclusive benefit of employees. Thus, the
fund is no way an asset or property of the union.”) (internal
quotation omitted).
“[T]he distinct juridical personality of an entity is
not merely a legal nicety.

Unless there is strong evidence to

the contrary, we must conclude that such boundaries were intended
to have some meaning, and they are not to be casually
disregarded.”

Berger v. Iron Workers Reinforced Rodmen Local

201, 852 F.2d 619, 621 (D.C. Cir. 1988).

IGD points to no reason

that the Trust Funds should be held liable for alleged conduct by
Johnson or the Union.
While Johnson is a trustee of two of the Plaintiff
Trust Funds, there is no allegation that Johnson was acting in
her capacity as trustee, or as a fiduciary or administrator, of a
trust when she allegedly misclassified the workers.

Lockheed

Corp. v. Spink, 517 U.S. 882, 890 (1996) (“[O]nly when fulfilling
certain defined functions, including the exercise of
discretionary authority or control over plan management or
administration, does a person become a fiduciary [of an ERISA
trust].”).

There is no allegation that any other trustee even

knew of Johnson’s alleged actions, let alone that the Trust Fund
as a whole ratified her conduct.

In other words, Johnson’s

alleged “actions were those of a Union [official] . . . rather

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than those of a Funds Trustee.”

NLRB v. Constr. & Gen. Laborers'

Union Local 1140, 887 F.2d 868, 871 (8th Cir. 1989).
Once the specific allegations against Johnson and the
Union are removed from the equation, all that remains regarding
the Trust Funds in IGD’s Counterclaim are conclusory statements
that the Funds “collaborated” and “conspired” with the Union and
Johnson.

But those statements are legal conclusions, not factual

allegations.

"[T]he tenet that a court must accept as true all

of the allegations contained in a complaint is inapplicable to
legal conclusions."

Iqbal, 556 U.S. at 678.

IGD wholly fails to

allege “the who, what, when, where, and how of the [alleged
conspiracy].”

Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106

(9th Cir. 2003).

To the extent IGD fails to adduce facts

indicating independent wrongdoing by the Trust Funds or by any
trustee acting in a trustee capacity, the bare allegation that
the Trust Funds or any trustee had knowledge of and conspired in
Johnson’s actions is insufficient.

A conspiracy charge is not a

talisman that allows plaintiffs to join Defendants against whom
there are no specific allegations.
IGD argues that “[t]he fact that [its] Counterclaim
does not set forth specific facts as to the relationship between
Johnson or any other person and [the Trust Funds] is not fatal to
IGD’s Counterclaim.”

Opp. At 13, ECF No. 15.

In support of this

assertion, IGD quotes extensively from a 1971 Hawaii Supreme

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Court case, Hall v. Kim, 53 Haw. 215, 491 P.2d 541, 542 (1971),
which itself relies on now-overruled language in Conley v.
Gibson, 355 U.S. 41 (1957).

In particular, IGD relies on the

notion that “a complaint should not be dismissed for failure to
state a claim unless it appears beyond doubt that the plaintiff
can prove no set of facts in support of his claim which would
entitle him to relief.”

Id. at 45-46.

As the Supreme Court has

pointed out, “[o]n such a focused and literal reading of Conley's
‘no set of facts’ [language], a wholly conclusory statement of
claim would survive a motion to dismiss whenever the pleadings
left open the possibility that a plaintiff might later establish
some ‘set of [undisclosed] facts’ to support recovery.”
Atl. Corp. v. Twombly, 550 U.S. 544, 561 (2007).

Bell

That

description precisely captures what IGD purports to do here:
without any factual allegation linking the Trust Funds to the
alleged wrongdoing, IGD simply asserts that the Trust Funds were
somehow implicated in a conspiracy against IGD.

That is nothing

more than “an unadorned, the-defendant-unlawfully-harmed-me
accusation" that does not permit this court to “draw the
reasonable inference that the [Trust Funds are] liable for the
misconduct alleged.”

Iqbal, 556 U.S. at 677-678.

Because almost all of IGD’s litany of claims against
the Trust Funds arise out of allegations against Johnson and the
Union, and not against the Trust Funds themselves or against

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trustees acting in a trustee capacity, this court sees no reason
to individually assess each claim.

Every claim, aside from the

unjust enrichment count, is deficient for the same reason--it
seeks to attribute liability to the Trust Funds for conduct
undertaken by third parties that can neither be traced back to
nor imputed to the Trust Funds.

Therefore, aside from the unjust

enrichment claim, all claims brought by IGD against the Trust
Funds are dismissed for failure to state a claim.
B.

IGD’s Unjust Enrichment Claim

“[A] claim for unjust enrichment requires [only] . . .
that a plaintiff prove that he or she conferred a benefit upon
the opposing party and that the retention of that benefit would
be unjust.”

Durette v. Aloha Plastic Recycling, Inc., 105 Haw.

490, 504, 100 P.3d 60, 74 (2004).

Therefore, to state a claim

for unjust enrichment, IGD is not required to demonstrate that
the Trust Funds themselves engaged in any wrongful act; IGD need
only allege that the Trust Funds’ retention of funds obtained
through allegedly wrongful acts by Johnson and the Union would be
unjust.
Whether or not IGD has pled facts sufficient to state a
valid claim for unjust enrichment, “ERISA preempts any state
claim for the restitution of contributions made after January 1,
1975.”

Chase v. Trustees of W. Conference of Teamsters Pension

Trust Fund, 753 F.2d 744, 746 (9th Cir. 1985).

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See 29 U.S.C.

§ 1144 (“[ERISA] shall supersede any and all State laws insofar
as they may now or hereafter relate to any employee benefit plan
described.”).
Even if IGD’s claim for unjust enrichment derives not
from state law but from federal common law, the Ninth Circuit
“has not recognized any such federal common law action for
restitution in favor of employers.”

British Motor Car Distrib.,

Ltd. v. San Francisco Auto. Indus. Welfare Fund, 882 F.2d 371,
377 (9th Cir. 1989).

Instead, in this circuit, an employer must

bring its restitution claims under section 403(c)(2)(A) of ERISA,
which governs situations in which employer contributions are made
“by a mistake of fact or law.”

29 U.S.C. § 1103(c)(2)(A).

See

Alaska Trowel Trades Pension Fund v. Lopshire, 103 F.3d 881, 885
(9th Cir. 1996) (“We have recognized an implied right to recover
mistaken payments to a trust fund pursuant to § 403(c)(2)(A) of
ERISA.

The right to a refund is not automatic, however, even if

the employer can demonstrate the requisite mistake of fact or
law; the employer must also show that the equities favor
restitution.”).

There is therefore “no basis for [an unjust

enrichment] action . . . where [the Ninth Circuit] allow[s]
employers to bring suit under ERISA for restitution of mistaken
contributions.”

British Motor Car Distributors, 882 F.2d at 377.

See also Great-W. Life & Annuity Ins. Co. v. Knudson, 534 U.S.
204, 209 (2002) (“ERISA's carefully crafted and detailed

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enforcement scheme provides strong evidence that Congress did not
intend to authorize other remedies that it simply forgot to
incorporate expressly.”) (internal quotation omitted).

IGD’s

unjust enrichment claim is therefore preempted by ERISA.
Because the court has dismissed all of IGD’s claims, it
need not address the Trust Funds’ multiple other grounds that the
Counterclaim should be dismissed, including the argument that
IGD’s other state law claims are also preempted by ERISA.
Nor does the court express any opinion as to whether
IGD’s allegations against Johnson and the Union may be successful
as an affirmative defense against the Trust Funds’ collection
action, a question that would only properly be before this court
if IGD were to file an appropriate motion to dismiss the Trust
Funds’ Complaint.
At the hearing on the present motion, counsel for IGD
indicated that he agreed with the court’s inclination that IGD’s
unjust enrichment claim needed to be brought under section
403(c)(2)(A), and that the Counterclaim did not contain
allegations sufficient to state any other claim against the Trust
Funds.

IGD’s counsel asked that IGD be granted leave to amend

its Counterclaim.

Because IGD may bring a restitution claim

under section 403(c)(2)(A) of ERISA, and because this court
cannot say that IGD will be unable to plead specific factual
allegations against the Trust Funds in a future Counterclaim,

15

this court grants IGD’s request.

See Eminence Capital, LLC v.

Aspeon, Inc., 316 F.3d 1048, 1051 (9th Cir. 2003) (“Rule 15's
[instruction that] leave [to amend] shall be freely given . . .
[should] be applied with extreme liberality.”).
However, the court stresses that if IGD intends to
bring any of the claims asserted in the original Counterclaim, it
must provide considerably more factual detail regarding any
allegedly wrongful conduct on the part of the Trust Funds.
Moreover, even if IGD can allege sufficient facts in support of
its state law claims, it should seriously consider whether such
claims are viable in the face of ERISA’s expansive preemption
provision.

See Paulsen v. CNF Inc., 559 F.3d 1061, 1082 (9th

Cir. 2009) (discussing the scope of ERISA’s preemption of state
law that “has either a ‘connection with’ or ‘reference to’ [an
employment benefit] plan”).
V.

CONCLUSION
The Trust Funds’ motion to dismiss is granted as to all

claims alleged in IGD’s Counterclaim.

IGD is given leave to file

an amended Counterclaim no later than December 27, 2013.

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IT IS SO ORDERED.
DATED: Honolulu, Hawaii, December 13, 2013.

/s/ Susan Oki Mollway
Susan Oki Mollway
Chief United States District Judge

Hawaii Laborers Trust Funds, et al v. IGD Hospitality, Inc.; IGD
Hospitality, Inc. v. Laboreres’ International Union of North
America Local 368, et al; Civ. No. 13-00320 SOM/KSC; ORDER
GRANTING MOTION TO DISMISS COUNTERCLAIM
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