Campbell et al v. Whobrey et al
Filing
119
MEMORANDUM Opinion and Order signed by the Honorable Edmond E. Chang. For the reasons stated in the Opinion, Defendants' motion 102 to dismiss Count 3 is granted. The retaliation claim is dismissed with prejudice. The parties shall confer abo ut the next step of the litigation (no further discovery was needed on the first two claims, R. 66). By 02/04/2019, the parties shall file a status report on their respective positions on what remains to do in the case. The 02/14/2019 status hearing remains in place.Emailed notice(slb, )
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
DORIS CAMPBELL, et al.,
Plaintiffs,
v.
CHARLES A. WHOBREY, et al.,
Defendants
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No. 16 C 4631
Judge Edmond E. Chang
MEMORANDUM OPINION AND ORDER
The Plaintiffs are current or former employees of The Kroger Company, which
is a nationwide grocery-store giant. The employees are enrolled in the Central States,
Southeast and Southwest Areas Pension Plan. They are suing the Plan and its
Trustees for an alleged breach of fiduciary duty and retaliation under the
Employment Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001, et
seq.1 R. 98, First. Am. Supp. Compl.2 The Plaintiffs assert that the Trustees neglected
their duties of prudence and loyalty by refusing to consider a third-party’s offer to
take on the Plaintiffs’ pension liabilities and thereby preserve their retirement
benefits. Id. They also claim that the Defendants retaliated against them for filing
their original complaint in this case by refusing to negotiate over the third-party offer
after the complaint’s filing. Id., see also R. 1, Compl. The Defendants now move to
dismiss the retaliation claim, which is Count 3 of the First Amended & Supplemental
1This
Court has subject matter jurisdiction under 28 U.S.C. § 1331.
to the docket are indicated by “R.” followed by the docket number and,
where necessary, a page or paragraph citation.
2Citations
Complaint. R. 101, Mot. Dismiss. For the reasons stated below, the motion is granted.
Count 3 is dismissed with prejudice.
I. Background
The Plan is a multiemployer defined-benefit pension plan set up under ERISA.
Employers from a variety of industries contribute to the Plan on behalf of their
employees. Until December 2017, Kroger contributed to the plan on behalf of certain
current and retired employees (the Kroger Participants). The Plaintiffs are Kroger
Participants.
At some point before July 2014, Kroger became concerned about the Plan’s
ability to continue paying the Kroger Participants’ retirement benefits. Indeed, the
Plaintiffs allege that the Plan is severely underfunded and will soon become
insolvent. R. 98, First Am. Supp. Compl. ¶¶ 52-56. On July 2, 2014, Kroger presented
“an early version” of a potential lifeline for the Kroger participants (call it the
Proposal for convenience’s sake); the audience for the presentation were Plan Trustee
Charles Whobrey and the Plan’s Executive Director, Thomas Nyhan. Id. ¶ 79. Kroger
and the International Brotherhood of Teamsters, which represents the Kroger
Participants in collective bargaining, offered to set up a separate, fully-funded
pension plan for the Kroger Participants—including the Plaintiffs. Id. ¶¶ 62-64. The
new Kroger Plan would have taken on the Plan’s liabilities to the Kroger Participants,
freeing the Plan from the responsibility to pay the Participants’ retirement benefits.
Id. But there was a catch: in exchange for removing the Kroger Participants from the
2
Plan, Kroger wanted to be discharged from its duty to pay ERISA’s statutory
withdrawal liability. Id.
Kroger and the Teamsters communicated the Proposal to the Plan Trustees in
writing on April 10, 2015. R. 97-16, First Am. Supp. Compl. at Exh. 15, 4/10/15
Withdrawal Ltr. Within five days, the Plan Trustees responded with a letter rejecting
the Proposal and laying out their reasons for doing so. R. 97-6, First Am. Supp. Compl.
at Exh. 5, 4/15/15 Central States Resp. Ltr. The Trustees explained that they were
“not authorized to accept the non-cash consideration offered by Kroger,” emphasized
that the Fund had a “firm policy against facilitating employer withdrawals in any
way,” and disputed that the Proposal would leave the Plan better off than if it held
Kroger to its duty to make cash withdrawal payments. Id. at 1-2.
On April 25, 2016, the Plaintiffs filed their initial complaint in this case. R. 1,
Compl. They alleged that the Trustees refused to negotiate over the Proposal or even
consider it at all, thereby shirking their fiduciary duties and leaving all Plan
participants—not just the Kroger Participants—worse off. Id. A few days later, the
Defendants allowed the original deadline that the Plaintiffs had set for acceptance of
the Proposal to pass without acting on it. First Am. Supp. Compl. ¶ 60; see R. 97-5,
First Am. Supp. Compl. at Exh. 4, 5/5/15 Ltr. of Understanding. On May 4, 2016,
apparently in response to the Plaintiffs’ filing of their original complaint, Nyhan sent
an email to Kroger stating that the trustees would “either negotiate or litigate but
not both.” R. 97-29, First Am. Supp. Compl. at Exh. 28, 5/4/16 Nyhan Email.
3
Nonetheless, negotiations seem to have continued after that date. On July 18,
2016, Defendant Nyhan met with Kroger and IBT and made a counteroffer to the
Proposal. First Am. Supp. Compl. ¶ 104. But Kroger was not satisfied: on July 23,
2016, Kroger sent a letter to the Plan expressing concern that the Plan was not
engaging in good-faith negotiation. R. 97-26, First Am. Supp. Compl. at Exh. 25,
7/23/16 Hoffman Ltr.; First Am. Supp. Compl. ¶ 109. Nyhan sent a brief email in
response on July 29, 2016, but negotiations stalled until October 21, 2016. R. 97-24,
First Am. Supp. Compl. at Exh. 23, 9/29/16 Nyhan Email. At that point, Kroger
offered to pay an additional $50-$90 million under the Proposal. R. 97-9, First Am.
Supp. Compl. at Exh. 8, 10/21/16 Kroger Counteroffer Ltr. at 4; First Am. Supp.
Compl. ¶ 63. Nyhan responded on November 4 proposing additional changes. R. 9725, First Am. Supp. Compl. at Exh. 24, 11/4/16 Nyhan Ltr.
Negotiations did not advance past that point, and Kroger withdrew from the
Plan on December 10, 2017. R. 97-30, First Am. Supp. Compl. at Exh. 29, Settlement
Agmt. at 2. Kroger and the Plan signed a settlement agreement on February 2, 2018
in which Kroger agreed to pay $418,546,581.91 for its withdrawal liability. Id. at 1,
11; First Am. Supp. Compl. ¶ 3. Under the agreement, the Plan is responsible for
paying accrued benefits for Kroger’s employees and retirees, and Kroger will
“backstop” benefits for participants who were employed on the withdrawal date. First
Am. Supp. Compl. ¶ 3.
On April 5, 2018, the Plaintiffs filed a First Amended and Supplemental
Complaint. In addition to the claims made in the original complaint, the Plaintiffs
4
added a third count, alleging that the Defendants had violated their rights under
ERISA § 510 by refusing to negotiate over the Proposal after they filed their original
complaint. First Am. Supp. Compl. ¶¶ 173-81. The Defendants filed a motion to
dismiss that new count, arguing that it does not sufficiently plead a violation of § 510.
Mot. Dismiss.
II. Legal Standard
Under Federal Rule of Civil Procedure 8(a)(2), a complaint generally need only
include “a short and plain statement of the claim showing that the pleader is entitled
to relief.” Fed. R. Civ. P. 8(a)(2). This short and plain statement must “give the
defendant fair notice of what the … claim is and the grounds upon which it rests.”
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (alteration in original) (cleaned
up).3 The Seventh Circuit has explained that this rule “reflects a liberal notice
pleading regime, which is intended to ‘focus litigation on the merits of a claim’ rather
than on technicalities that might keep plaintiffs out of court.” Brooks v. Ross, 578
F.3d 574, 580 (7th Cir. 2009) (quoting Swierkiewicz v. Sorema N.A., 534 U.S. 506, 514
(2002)).
“A motion under Rule 12(b)(6) challenges the sufficiency of the complaint to
state a claim upon which relief may be granted.” Hallinan v. Fraternal Order of Police
of Chi. Lodge No. 7, 570 F.3d 811, 820 (7th Cir. 2009). “[A] complaint must contain
sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible
3This
opinion uses (cleaned up) to indicate that internal quotation marks, alterations,
and citations have been omitted from quotations. See Jack Metzler, Cleaning Up Quotations,
18 Journal of Appellate Practice and Process 143 (2017).
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on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S.
at 570). These allegations “must be enough to raise a right to relief above the
speculative level.” Twombly, 550 U.S. at 555. The allegations that are entitled to the
assumption of truth are those that are factual, rather than mere legal conclusions.
Iqbal, 556 U.S. at 678-79.
ERISA § 510 makes it “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.”
29 U.S.C § 1140.
III. Analysis
The Defendants make three primary arguments why Count 3 of the First
Amended and Supplemental Complaint should be dismissed. First, they argue that
the Plaintiffs did not adequately allege an adverse action under ERISA § 510. Mot.
Dismiss at 8-9. Although the Defendants frame it as a distinct argument, they also
claim that the behavior alleged by the Plaintiffs is outside the scope of § 510. Id. at
14-15. Second, they argue that the Plaintiffs did not adequately allege that the
Defendants had a specific intent to interfere with their benefits. Id. at 9-12. Third—
and finally—they argue that ERISA does not authorize money damages for violations
of § 510. Id. at 12-14. The Court will address each argument in turn.
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1. Adverse Action
The Defendants argue that the Plaintiffs have failed to allege that they
committed an “adverse action” that violated § 510. Mot. Dismiss at 8-9. The
Defendants make two main arguments in support of this claim. First, they contend
that they did negotiate with Kroger even after the Plaintiffs filed their original
complaint. Id. at 8. And second, they argue that because their negotiations were
against Kroger and not against the Plaintiffs themselves—both before and after the
original complaint was filed—their actions could not be adverse to the Plaintiffs. Id.
at 8-9. The Plaintiffs respond that the Seventh Circuit defines “adverse action”
broadly and that they have alleged enough facts to raise an inference of retaliation.
R. 106, Pl. Resp. at 1, 6-8.
“Adverse action” is really shorthand for the specific statutory terms in ERISA
§ 510, which makes it illegal to “discharge, fine, suspend, expel, discipline, or
discriminate against a participant or beneficiary for exercising” particular rights (like
suing under ERISA). 29 U.S.C. § 1140. The pertinent term at issue in this case is
“discriminate.” That term does encompass more than the typical punishment that an
employer might impose against an employee. Indeed, the Seventh Circuit even has
resisted holding that only employers can be liable for violations of § 510. See
Teamsters Local Union No. 705 v. Burlington N. Santa Fe, LLC, 741 F.3d 819, 82627 (7th Cir. 2014) (“We are not saying that only employers can be liable for violating
§ 510—although some of our opinions can be read to suggest as much. As we have
recently explained, this language was dicta, and any assumption that only employers
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can be liable under § 510 was ill founded.”) (cleaned up). What’s more, an adverse
action (using the shorthand again) under § 510 need not even involve a direct
interference with an employment relationship. See Feinberg v. RM Acquisition, LLC,
629 F.3d 671, 675-76 (7th Cir. 2011) (citing Mattei v. Mattei, 126 F.3d 794, 807 n.12
(6th Cir. 1997)) (explaining that language in prior cases limiting adverse actions to
those that “deliberately [] alter the employment relation” was dicta, and that the
language of § 510 leaves room for actions taken outside of the employment
relationship or against participants or beneficiaries who are not employees).
But there still are limits to the types of acts that can plausibly be covered by
§ 510. In both Teamsters and Feinberg, the Seventh Circuit ultimately held that the
plaintiffs had failed to allege adverse actions (that is, discrimination) under § 510. In
Feinberg, the employer had opted not to assume pension liability for the plaintiffs
when it acquired their former employer. Feinberg, 629 F.3d at 673. The Seventh
Circuit reasoned that the employer could not be held responsible under § 510 for
failing to do something it never had any legal obligation to do in the first place and
concluded that the employer’s choice not to assume the pension liability failed to
qualify as discrimination. Id. at 675-76 (“A buyer of assets has, with exceptions
inapplicable to this case, no obligation to assume the seller’s liabilities”). In
Teamsters, the Seventh Circuit refused to hold the defendant-employer responsible
under § 510 when its contractor discharged the plaintiffs, who were employees of the
contractor—not of the defendant-employer. Teamsters, 741 F.3d at 821. Because the
defendant was not the plaintiffs’ employer and did not discharge the employees, it
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could not possibly be liable for the discharge. Id. (“Although liability under [§ 510] is
not limited to employers, the plaintiffs allege only an unlawful ‘discharge,’ which
presumes an employment relationship. [The defendant was not the plaintiffs’
employer], so the district court properly dismissed the § 510 claim.”). Teamsters and
Feinberg illustrate that there are limits on what can qualify as discrimination under
§ 510. At the very least, the challenged conduct must have been committed by the
defendant (Teamsters) and cannot simply be something that the defendant has an
absolute right to do (Feinberg).
It might very well be that another limit applies here, specifically, that a viable
claim of § 510 discrimination must allege that the defendant treated the plan
participants or beneficiaries differently from other plan participants or beneficiaries.
After all, that is what “discriminate” typically means. CSX Transp., Inc. v. Alabama
Dep’t of Revenue, 562 U.S. 277, 286-87 (2011) (“discriminates” means “to make a
difference in treatment or favor on a class or categorical basis in disregard of
individual merit”) (quoting Webster’s Third New International Dictionary 648
(1976)). If that meaning were to control here, then the Plaintiffs’ retaliation claim
would run into the obstacle that the alleged refusal to negotiate presumably does not
differentiate amongst plan participants, so the Plan is not treating some participants
one way and other participants in a different way. Indeed, the Plaintiffs’ theory of
discrimination is literally unprecedented: the Court has found no similar § 510 case
against a Plan for refusing to negotiate with an employer. Having said that, there
might be good reasons to interpret the term “discriminate” in a broader way for
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purposes of an anti-retaliation statute, or in the labor and employment context,
Mattei v. Mattei, 126 F.3d 794, 803-06 (6th Cir. 1997). In any event, there is no need
to decide that question, because the Plaintiffs’ retaliation claim fails for an
independent reason.
Specifically, the timeline that the Plaintiffs allege simply does not hold
together because it is internally inconsistent. The Plaintiffs allege that “[f]ollowing
the filing of [the] lawsuit, Defendant Nyhan, writing on behalf of the Trustees, stated
that they were not willing to negotiate the Proposal, which would have preserved
Plaintiffs’ benefits, because of the lawsuit.” First Am. Supp. Compl. ¶ 177. But the
Plaintiffs also allege that the Defendants refused to negotiate the Proposal before
they began this lawsuit: “Before this lawsuit was filed on April 25, 2016, Defendants
simply refused to engage in negotiations with Kroger, and they refused to consider
the Proposal.” Id. ¶ 99 (emphasis added). If anything, the Defendants were more
willing to negotiate (at least on the surface) after April 25, 2016: “After the lawsuit
was filed, Defendants attempted to create the appearance of bargaining in order to
gain a litigation advantage.” Id. For example, before April 2016, the Defendants never
made any kind of counteroffer to the Proposal. Id. ¶ 102. But after the first complaint
was filed, in July 2016, they did. Id. ¶¶ 106-07. Ultimately, the Plaintiffs’ own
allegations of the Defendants’ pre-lawsuit refusal to negotiate fatally undermine the
plausibility of the retaliation claim, so Count 3 must be dismissed.
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2. Specific Intent
The Defendants also argue that the Complaint fails to allege that “Defendants
intentionally interfered with [Plaintiffs’] use or attainment of benefits.” Mot. Dismiss
at 9-12 (emphasis added). Liability under § 510 requires a “specific intent to violate
the statute and to interfere with an employee’s ERISA rights.” Lucas v. PyraMax
Bank, FSB, 539 F.3d 661, 668 (7th Cir. 2008) (emphasis in original) (quoting Bilow
v. Much Shelist Freed Denenberg Ament & Rubenstein, P.C., 277 F.3d 882, 892 (7th
Cir. 2001)). “The intent to frustrate the attainment of benefits must have been at
least a motivating factor for the adverse action against the plan participant.”
Teamsters, 741 F.3d at 826.
The Plaintiffs counter that federal courts “do not require specific intent to be
pled with great particularity.” Pl. Resp. at 8. The Plaintiffs point to particular facts
alleged in the Complaint suggesting that the Defendants intended to interfere with
their benefits, particularly Nyhan’s May 4, 2016 email, which said that the trustees
would “either negotiate or litigate but not both.” First Am. Supp. Compl. at Exh. 28,
5/4/16 Nyhan Email; First Am. Supp. Compl. ¶¶ 127, 179; see Pl. Resp. at 9.
Whether the Plaintiffs have sufficiently alleged that the Defendants had a
specific intent to interfere with the Plaintiffs’ benefits is a close question. It is one
thing to allege a failure to act prudently or to breach a fiduciary duty, as the Plaintiffs
try in the first two Counts. It is quite another to allege that the Defendants
specifically intended to prevent employees from obtaining their benefits. Again, the
Plaintiffs rely on the Nyhan email, which declared that there would be negotiation or
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litigation, but not both. See First Am. Supp. Compl. at Exh. 28, 5/4/16 Nyhan Email.
It seems odd to draw an inference, even viewing the allegation in the Plaintiffs’ favor,
of intent to interfere from that email, because premising the retaliation claim on
Nyhan’s position puts the defense between a rock and a hard place: as part of the
relief sought in this case, the Plaintiffs seek to compel the Plan (through an
independent fiduciary) to negotiate with Kroger. First. Am. Supp. Compl. at 49. The
Plan objects and so it is defending against the complaint. Yet the Plaintiffs seek to
characterize the refusal to negotiate, combined with the defense against the
complaint, as specific intent to interfere with the Plaintiffs’ benefits. That in effect
amounts to a demand that the Plan capitulate to the relief requested lest it face a
retaliation claim. Add to that the apparently undisputed fact (though it is not pled in
the amended complaint) that Kroger funded the lawsuit, see Mot. Dismiss at 1 (“It is
undisputed that Kroger funded and directed this lawsuit (including by selecting
Plaintiffs’ counsel) …”), and the Defendants’ refusal to negotiate appears to be a
strategy intended to prevent Kroger’s maneuver in instigating the lawsuit—not one
intended to interfere with the Plaintiffs’ benefits.
In any event, as discussed earlier, because the Plan refused to negotiate even
before the lawsuit’s filing, there is no plausible retaliation claim and there is no need
to definitively decide whether specific intent was adequately alleged.
3. Monetary Relief
Finally, the Defendants argue that “the relief [Plaintiffs] seek is not available
under ERISA,” Mot. Dismiss at 12, and they specifically challenge any form of
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monetary relief. The remedies for § 510 (codified at 29 U.S.C. § 1140) are limited to
those provided in § 502(a)(3), which in turn only provides for injunctive and other
“appropriate equitable relief.” ERISA § 502(a)(3), codified at 29 U.S.C. § 1132(a)(3).
See Teumer v. Gen. Motors Corp., 34 F.3d 542, 544 (7th Cir. 1994) (“Made enforceable
by participants and beneficiaries through § 502(a)(3), § 510 protects employment
relationships from disruptions.”); Tolle v. Carroll Touch, Inc., 977 F.2d 1129, 1133
(7th Cir. 1992) (“A Section 510 claim is made enforceable through [ERISA]
Section 502(a)(3).”). The Plaintiffs respond that equitable remedies can include
restitution and other monetary relief, such as unpaid benefits. Pl. Resp. at 9-12. For
the sake of completeness and to guide the parties going forward, the Court will
discuss this dispute, even though Count 3 is dismissed on other grounds.
On Plaintiffs’ request for restitution, § 502(a)(3) only allows money damages
when they qualify as “equitable relief.” The Plaintiffs point to cases decided by the
District Court from 1986 to 2003 allowing broader types of monetary damages under
§ 510. See Pl. Resp. at 9-10. In 2002, however, the Supreme Court held that “for
restitution to lie in equity, the action generally must seek … to restore to the plaintiff
particular funds or property in the defendant’s possession.” Great-West Life &
Annuity Ins. Co. v. Knudson, 534 U.S. 204, 214 (2002); see also Montanile v. Bd. of
Tr. of Nat. Elevator Indus. Health Benefit Plan, 136 S. Ct. 651, 655 (2016) (holding
that a plan fiduciary may not recover expenses under § 502(a)(3) from a “participant’s
remaining assets” when the participant has already spent any recoverable funds “on
nontraceable items”). In 2016, the Seventh Circuit made the requirement even more
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concrete: to state a viable claim for monetary relief under § 502(a)(3), the plaintiff
must “point[] to specifically identifiable funds in the defendant’s possession to which
an equitable lien could attach.” Cent. States, SE & SW Areas Health & Welfare Fund
by Bunte v. Am. Int’l Grp., Inc., 840 F.3d 448, 453 (7th Cir. 2016). There is no
allegation that the Defendants have that sort of identifiable funds in their possession
(much less that they gained them by their alleged refusal to negotiate the Proposal),
so the Plaintiffs have no restitution to recover under § 510.
The Plaintiffs assert that the Defendants’ damages argument as to Count 3
could apply equally to their breach of fiduciary duty claims because “the same
provision of ERISA, § 502(a)(3), authorizes relief for both sets of claims.” Pl. Resp. at
11. But that is not right. The Plaintiffs’ breach of fiduciary duty claims are governed
by 29 U.S.C. § 1109. Section 1109 has a broader set of remedies, described at
§ 1109(a):
Any person … shall be personally liable to make good to such plan any losses
to the plan resulting from each such breach, and to restore to such plan any
profits of such fiduciary which have been made through use of assets of the
plan by the fiduciary, and shall be subject to such other equitable or remedial
relief as the court may deem appropriate.
29 U.S.C. § 1109(a). Section 1132(a)(3) (ERISA § 502(a)(3)) simply does not apply to
claims of breach of fiduciary duty under § 1109. Instead, § 1132 itself explicitly points
those claims back to § 1109. 29 U.S.C. § 1132(a)(2) (“A civil action may be brought …
by the Secretary, or by a participant, beneficiary, or fiduciary for appropriate relief
under section 1109 of this title.”). The bottom line is that monetary relief is not
available to the Plaintiffs on Count 3.
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IV. Conclusion
For the reasons above, Count 3 of the Plaintiffs’ First Amended and
Supplemental Complaint is dismissed. The Plaintiffs did not suggest a possible
amendment to the claim (and the complaint has already been amended and
supplemented), so the dismissal is with prejudice. The parties shall confer about the
next step of the litigation (no further discovery was needed on the first two claims, R.
66). By February 4, 2019, the parties shall file a status report on their respective
positions on what remains to do in the case. The February 14, 2019 status hearing
remains in place.
ENTERED:
s/Edmond E. Chang
Honorable Edmond E. Chang
United States District Judge
DATE: January 14, 2019
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