Teamsters Local Union 705 et al v. Burlington Northern Santa Fe, LLC et al

Filing 60

MEMORANDUM Opinion Signed by the Honorable Samuel Der-Yeghiayan on 11/3/2011: Mailed notice (mw, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
TEAMSTERS LOCAL UNION 705, et al., )
)
Plaintiffs,
)
)
v.
)
)
BNSF RAILWAY COMPANY, et al.,
)
)
Defendants.
)

No. 10 C 7378

MEMORANDUM OPINION
SAMUEL DER-YEGHIAYAN, District Judge
This matter is before the court on Defendants’ motions to dismiss. For the
reasons stated below, the motions are granted.

BACKGROUND
Individual Plaintiffs in this action are members of Plaintiff Teamsters Union
Local 705 (Local 705). Defendant Burlington Northern Santa Fe, LLC (Burlington
LLC), Defendant Burlington Northern Santa Fe Corporation (Burlington Corp.),
Defendant BNSF Railway Company (BNSF), Defendant Santa Fe Terminal Services,
Inc. (Terminal), and Defendant Berkshire Hathaway, Inc. (Berkshire) allegedly
operated the Corwith Inter-Modal Rail Yard (Corwith) in Chicago, Illinois. BNSF
1

allegedly retained Defendant Rail Terminal Services (RTS) to manage Corwith.
BNSF was also assisted in the operation of Corwith by Defendant Rail Management
Services (RMS) and Defendant Carrix, Inc. (Carrix).
Local 705 allegedly represented the RTS workers at Corwith prior to June
2010. In June 2010, BNSF allegedly covertly negotiated a proposed agreement
concerning the pension, health, and welfare benefits of workers at Corwith with
Defendant Transportation Communications International Union (TCU). BNSF then
allegedly negotiated with Local 705 to determine whether BNSF could obtain benefit
concessions from Local 705. BNSF then allegedly took steps to replace Local 705
with TCU at Corwith.
BNSF allegedly cancelled the contract with RTS at Corwith and in October
2010, RTS allegedly informed Local 705 that it was permanently discontinuing
assistance in the operations at Corwith and that Local 705 would be terminated
within a 14-day period commencing on December 31, 2010. Plaintiffs contend that
the majority of workers represented by Local 705 will be terminated and that
although some could re-apply for jobs at Corwith, they would forfeit certain benefits,
including pension benefits. Plaintiffs contend that Defendants engaged in a
deceptive scheme in order to interfere with the ability of the workers at Corwith to
exercise their rights under the Employee Retirement Income Security Act (ERISA),

2

29 U.S.C. § 1001 et seq., and to retaliate against workers for the exercise of their
rights under ERISA.
Plaintiffs include in their amended complaint ERISA interference and
retaliation claims (Count I), and a civil conspiracy claim (Count II). Defendants
move to dismiss all claims.

LEGAL STANDARD
In ruling on a motion to dismiss brought pursuant to Federal Rule of Civil
Procedure 12(b)(6) (Rule 12(b)(6)), a court must “accept as true all of the allegations
contained in a complaint” and make reasonable inferences in favor of the plaintiff.
Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009)(stating that the tenet is “inapplicable
to legal conclusions”); Thompson v. Ill. Dep’t of Prof’l Regulation, 300 F.3d 750,
753 (7th Cir. 2002). To defeat a Rule 12(b)(6) motion to dismiss, “a complaint must
contain sufficient factual matter, accepted as true, to state a claim to relief that is
plausible on its face.” Iqbal, 129 S.Ct. at 1949 (internal quotations omitted)(quoting
in part Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A complaint that
contains factual allegations that are “merely consistent with a defendant’s liability . .
. stops short of the line between possibility and plausibility of entitlement to relief.”
Iqbal, 129 S.Ct. at 1949 (internal quotations omitted).

3

DISCUSSION

I. Section 511 ERISA Claims
Defendants argue that the claims brought pursuant to Section 511 of ERISA
are not applicable in the instant action. Plaintiffs indicate in their amended complaint
that they are bringing ERISA claims pursuant to Section 510 of ERISA (Section
510), 29 U.S.C. § 1140, and Section 511 of ERISA (Section 511), 29 U.S.C. § 1141.
(A. Compl. Par. 41). As Defendants correctly point out, Section 511 imposes
criminal penalties for certain ERISA violations. 29 U.S.C. § 1141. Section 511 is
thus not applicable in the instant action, and all claims based on Section 511 are
dismissed.

II. Corporate Parents and Affiliates
Plaintiffs have named as Defendants various parents and affiliates of BNSF
and RTS such as Burlington Corp., Burlington LLC, Terminal, Berkshire, RMS, and
Carrix. In general, “a parent and a subsidiary are two separate entities and the acts of
one cannot be attributed to the other.” Central States, Southeast and Southwest
Areas Pension Fund v. Reimer Express World Corp., 230 F.3d 934, 944 (7th Cir.

4

2000). In the instant action, Plaintiffs have failed to allege sufficient facts to indicate
any direct involvement in the alleged wrongdoing by the above-listed parents or
affiliates. Plaintiffs also argue that determining whether certain entities are parents
or affiliates of other Defendants involves a consideration of materials outside of the
pleadings. However, for several Defendants, Plaintiffs have provided such
information in the amended complaint and, regardless of the corporate relationships
of the above-named Defendants, Plaintiffs have not alleged sufficient facts
concerning their specific involvement in the alleged wrongdoing. Therefore, based
on the above, the motions to dismiss brought by the above-named Defendants are
granted.

III. Section 510 Claims
Defendants move to dismiss the Section 510 claims brought against BNSF,
RTS, and TCU. Section 510 provides in part the following:
It shall be unlawful for any person to discharge, fine, suspend, expel,
discipline, or discriminate against a participant or beneficiary for exercising
any right to which he is entitled under the provisions of an employee benefit
plan, this subchapter, section 1201 of this title, or the Welfare and Pension
Plans Disclosure Act [29 U.S.C.A. § 301 et seq.], or for the purpose of
interfering with the attainment of any right to which such participant may
become entitled under the plan, this subchapter, or the Welfare and Pension
Plans Disclosure Act. It shall be unlawful for any person to discharge, fine,
suspend, expel, or discriminate against any person because he has given
information or has testified or is about to testify in any inquiry or proceeding
5

relating to this chapter or the Welfare and Pension Plans Disclosure Act.

29 U.S.C. § 1140. Section 510 is not limited to claims involving an
employer/employee relationship. See, e.g., Feinberg v. RM Acquisition, LLC, 629
F.3d 671, 675 (7th Cir. 2011).

A. Section 510 Claim Against TCU and BNSF
TCU and BNSF argue that it was RTS that allegedly employed the Individual
Plaintiffs and thus neither TCU nor BNSF could have taken actions such as
discharging or suspending Individual Plaintiffs as provided in Section 510. Plaintiffs
allege in the amended complaint that Individual Plaintiffs were employed by RTS
and that BNSF retained RTS to manage Corwith. (A. Compl. Par. 17-19, 27).
Plaintiffs allege that RTS made the decision to terminate Individual Plaintiffs. (A.
Compl. Par. 26-27). There are not sufficient allegations to indicate that TCU
participated in any way in the decision by RTS to terminate the employment of
Individual Plaintiffs. In regard to BNSF, Plaintiffs allege that BNSF had some
control over RTS’s operations at Corwith. (A. Compl. Par. 17-18). However, that is
not sufficient to plausibly suggest that BNSF dictated to RTS what employees it
would terminate or participated in the decision to terminate Individual Plaintiffs. As
BNSF points out, RTS was free to reassign Individual Plaintiffs to other RTS
6

operations when BNSF cancelled RTS’s contract at Corwith. Therefore, the motions
to dismiss by TCU and BNSF as to the Section 510 claims are granted.

B. Section 510 Claims Against RTS
Defendants argue that there are not sufficient allegations to indicate that RTS
is liable under Section 510. Plaintiffs contend that BNSF “play[ed] [Local 705] off
of [TCU] to see which Union would give more concessions.” (Ans. 5, 14).
However, Plaintiffs fail to explain how, even if true, such conduct violates ERISA.
Plaintiffs contend that BNSF ultimately was able to pay less for benefits for
workers at Corwith. However, Plaintiffs do not allege facts that suggest that such a
result, even if true, violated ERISA. As BNSF points out, under Plaintiffs’ theory
whenever an employer moves from a more expensive unionized workforce to a less
expensive workforce, either by employing non-union workers or by creating a
relationship with a different union, the employer would violate ERISA. Plaintiffs do
not suggest that BNSF was unable contractually to cancel the contract with RTS at
Corwith. Nor have Plaintiffs suggested that the cancellation of the contract with
RTS violated any collective bargaining agreement entered into by Local 705.
Plaintiffs must allege more than general statements that Defendants interfered with
their ERISA rights. An action taken in accordance with the law that results in the

7

termination of certain ERISA benefits does not unlawfully interfere with ERISA
rights and Plaintiffs have not alleged sufficient facts to suggest unlawful actions by
Defendants. Although Plaintiffs point to one Ninth Circuit case that they contend is
similar to this case, Plaintiffs have not cited any case in the Seventh Circuit which
has held that circumstances such as those alleged in the instant action can support an
ERISA claim. (Ans. 7-8). Nor is the instant action a case where an employer merely
switched one contractor for another contractor in order to avoid ERISA obligations.
The facts as alleged in the amended complaint reflect that BNSF changed its manner
of operations by eliminating RTS as a contractor and deciding to operate Corwith inhouse with Terminal. In addition, although Plaintiffs claim that Individual Plaintiffs
have to “start from scratch,” RTS could have assigned Individual Plaintiffs to new
RTS positions and that fact that BNSF decided to operate Corwith itself does not
mean that Plaintiffs’ ERISA rights were somehow violated. (Ans. 8).
Plaintiffs also indicate in their answer that the “unlawful purpose” of the
alleged scheme in this case violated labor laws because BNSF allegedly bargained
with two separate unions covering the same class of members at the same time.
(Ans. 14). Plaintiffs also argue that TCU entered into negotiations with BNSF even
though it was “not the authorized representative of the workers at Corwith. . . .”
(Ans. 15). However, Plaintiffs indicate in their amended complaint that they are

8

bringing ERISA claims in this case, not labor law claims. Plaintiffs have in fact
specifically indicated in the amended complaint that they are not bringing claims for
violations of labor laws. (A. Compl. Par. 37). Defendants cannot be expected to
speculate as to the basis of Plaintiffs’ claims and Plaintiffs have failed to provide
sufficient facts to plausibly suggest a violation of Section 510 by RTS. In addition,
Plaintiffs have not alleged facts to suggest that RTS acted with the requisite intent to
unlawfully interfere with Plaintiffs’ ERISA rights or retaliate for the exercise of such
rights. Therefore, the motion to dismiss by RTS as to the Section 510 claim is
granted.

IV. Conspiracy Claims
Defendants also move to dismiss the conspiracy claims arguing that Plaintiffs
have not alleged sufficient allegations regarding the alleged conspiracy. Defendants
also contend that Plaintiffs are impermissibly attempting to use a common law
conspiracy claim to expand the scope of Section 510 beyond that intended by
Congress.

A. Insufficient Facts For Conspiracy Claim
Defendants contend that Plaintiffs present only vague and conclusory

9

statements to support the conspiracy claims. Plaintiffs argue that they have set forth
the general time period of the alleged conspiracy, the members in the conspiracy, and
the general agreement underlying the conspiracy. However, contrary to Plaintiffs’
contentions, the underlying agreement between the parties is not apparent based on
the allegations in the amended complaint. Plaintiffs attempt to give an in-depth
explanation of the conspiracy and the role of the various Defendants in their response
to the motions to dismiss, but Plaintiffs cannot rewrite the amended complaint in
their response. For example, Plaintiffs contend that RTS was a “sham” intermediary
and that BNSF made all management decisions at Corwith including deciding who
would be terminated by RTS. (Ans. 16). However, Plaintiffs failed to include such
details in the amended complaint or even include facts that would suggest such
conclusions. Plaintiffs merely allege that BNSF “had overall general management
control and made decisions with regard to running Corwith,” which was natural
considering that Corwith was still BNSF’s facility. (A Compl. Par.17- 18).
However, the elaborations provided in Plaintiffs’ response to the instant motions
regarding control over RTS’s operations such as personnel decisions are far and
above what is alleged in the amended complaint. The scope and underlying facts of
the alleged conspiracy can only be speculated by piecing together various facts from
the amended complaint and filling in large gaps with supposition.

10

The court also notes that the allegations in the amended complaint contradict
that supposed conspiracy as defined in Plaintiffs’ response to the motion to dismiss.
For example, although Plaintiffs contend that RTS was a conspirator and terminated
Individual Plaintiffs, Plaintiffs have not offered any explanation of what benefit RTS
would receive from such an arrangement where it lost its contract at Corwith and
terminated employees. Plaintiffs also repeatedly contend that BNSF “play[ed]” the
two unions against each other to get the best concessions, indicating that the unions
are victims in this matter. (Ans. 5, 8, 14). However, Plaintiffs also contend that
TCU, one of the supposed victims was a participant in the hidden conspiracy. Thus,
the plausible inferences from Plaintiffs’ own allegations contradict the elaborations
provided in response to the motions to dismiss. Thus, Plaintiffs have not alleged
sufficient facts to state a valid conspiracy claim.

B. Expansion of Section 510
Defendants argue that, even if Plaintiffs had alleged sufficient facts
concerning a conspiracy, Plaintiffs cannot do so based on state or federal common
law. ERISA has been held to “completely preempt[] state law on the subject of
pension and welfare plans.” Whitely v. Moravec, 635 F.3d 308, 310 (7th Cir. 2011).
Plaintiffs cite Illinois state law in support of their conspiracy claim. (Ans. 14).

11

However, to the extent that Plaintiffs seek to bring a common law conspiracy claim,
they cannot do so under Illinois law since the conduct upon which the alleged
conspiracy claims are based is the same conduct upon which the Section 510 claims
are based. To the extent that Plaintiffs could rely upon federal common law for a
conspiracy claim, Plaintiffs fail to cite any court in the Seventh Circuit that has
applied such federal common law in this ERISA context, and this court declines to
expand the scope of Section 510 in such a manner in the instant action. Therefore,
the motion to dismiss the conspiracy claims is granted.

V. Motion to Exclude
Plaintiffs have filed a motion to exclude the court from considering a contract
entered into between BNSF and RTS (Contract). Plaintiffs contend that the Contract
is outside of the four corners of the amended complaint and cannot be considered at
the motion to dismiss stage. However, it was not necessary to take into consideration
the Contract in order to resolve the motions to dismiss. For example, although BNSF
refers to the Contract to show that the Individual Plaintiffs were employees of RTS,
(BNSF Mem. 2), based on Plaintiffs’ own allegations in the amended complaint, it is
apparent that Individual Plaintiffs worked for RTS and RTS was contracted by BNSF
to operate Corwith. (A Compl. Par. 17-19, 26-27). Therefore, the motion to exclude

12

is denied as moot.

CONCLUSION
Based on the foregoing analysis, the motions to dismiss are granted and the
motion to exclude is denied as moot.

___________________________________
Samuel Der-Yeghiayan
United States District Court Judge
Dated: November 3, 2011

13