GCIU-Employer Retirement Fund v. Coleridge Fine Arts
Filing
93
MEMORANDUM AND ORDER granting 39 Motion to Dismiss for Lack of Jurisdiction. The Court finds that there are insufficient minimum contacts by Defendants and that Plaintiffs' injuries do not arise from Defendants' contacts. See Order for further details. Signed by District Judge Eric F. Melgren on 7/8/2019. (sz)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
GCIU-EMPLOYER RETIREMENT FUND
AND BOARD OF TRUSTEEES OF THE
GCUI-EMPLOYER RETIREMENT FUND,
Plaintiffs,
vs.
Case No. 14-2303-EFM-KGG
COLERIDGE FINE ARTS, et al.
Defendants.
MEMORANDUM AND ORDER
Plaintiffs GCIU-Employer Retirement Fund and its Board of Trustees (“Plaintiffs” or “the
Fund”) bring this action against two Irish companies, Coleridge Fine Arts (“Coleridge”) and
Jelniki Limited (“Jelniki”). Plaintiffs seek to collect withdrawal liability payments under the
Employee Retirement Income Security Act of 1974 (“ERISA”) and the Multiemployer Pension
Plan Amendments Act of 1980 (“MPPAA”). Defendants previously moved for dismissal under
Fed. R. Civ. P. 12(b)(2) asserting that the Court lacked personal jurisdiction. The Court agreed
and dismissed the case.
On appeal, the Tenth Circuit Court of Appeals agreed that it did not appear that there was
a basis for personal jurisdiction. The circuit, however, reversed the dismissal because it found that
this Court should have allowed jurisdictional discovery. Upon remand, the parties conducted
limited discovery.
Defendants are again before the Court moving for dismissal on the basis that the Court
lacks personal jurisdiction. The Court finds that there are insufficient minimum contacts by
Defendants and that Plaintiffs’ injuries do not arise from Defendants’ contacts. Thus, the Court
grants Defendants’ Motion to Dismiss for Lack of Personal Jurisdiction (Doc. 39).
I.
Factual and Procedural Background1
Plaintiff GCUI-Employer Retirement Fund is a multiemployer pension plan. Plaintiff
Board of Trustees is made up of the present trustees who are the named fiduciaries of the Fund.
The Fund is primarily funded by contributions remitted by multiple participating employers as a
result of negotiated collective bargaining agreements (“CBAs”).
Defendant Coleridge is a corporation domiciled in the Republic of Ireland. Defendant
Jelniki is a company domiciled in the Republic of Ireland. Coleridge is a wholly-owned subsidiary
of Jelniki.
Coleridge wholly-owned Greystone Graphics, Inc. (“Greystone), a Kansas corporation, as
of 2002. A collective bargaining agreement (“CBA”) bound Greystone to make contributions to
Plaintiff Fund.
In February 2011, Greystone ceased doing business and is now a defunct
corporation. Its cessation of business effectuated a complete withdrawal from the Fund.
1
The facts are taken from Plaintiffs’ Amended Complaint, as well as the exhibits attached to the Amended
Complaint and the exhibits attached to Defendants’ and Plaintiffs’ briefing and supplemental briefing. Additional
facts were set forth in this Court’s previous Order. Doc. 52.
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On April 15, 2013, a default judgment was entered by the United States District Court in
the Central District of California against Greystone, JDV, Co.,2 Greystone Investment Company,
and Coleridge Design and Imaging, Inc., in the amount of $4,454,092.02 in withdrawal liability.
In 2014, Plaintiffs filed suit against Coleridge and Jelniki asserting that they were affiliated
with Greystone and Coleridge Design and Imaging, Inc., and were liable for the withdrawal
liability. Defendants filed a Motion to Dismiss (Doc. 39) asserting that the Court lacked personal
jurisdiction over the foreign defendants. Defendants submitted an affidavit to the Court in which
Eugene Reynolds, director and shareholder of Coleridge, averred that Defendants Coleridge and
Jelniki never had direct control over the daily affairs of Greystone. Defendants had separate
budgets, payroll, and business records from Greystone. Defendants did not have the authority to
make business decisions related to Greystone and did not conduct business on behalf of Greystone.
Similarly, Greystone did not conduct business on behalf of Defendants. The Court agreed that
there was no personal jurisdiction over Coleridge and Jelniki and dismissed the case.
On appeal to the Tenth Circuit Court of Appeals, the circuit found that the record “[fail[ed]
to show that either Coleridge or Jelniki had sufficient minimum contacts with the forum to permit
the federal courts to exercise specific personal jurisdiction.”3 The Tenth Circuit, however, found
that this Court abused its discretion when it did not permit Plaintiff to conduct further discovery
on the personal jurisdiction issue. The circuit remanded the case directing the Court to permit
jurisdictional discovery on the “question of whether Coleridge and Jelniki, either directly or
2
Coleridge also owns 100 percent of JDV, Co.
3
GCIU-Employer Ret. Fund v. Coleridge Fine Arts, 700 F. App’x 865, 870 (10th Cir. 2017).
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through their owners, directors, or agents, were involved in the day-to-day management of
Greystone.”4
The parties conducted discovery and the following facts come from this additional
discovery. Kevin Walsh is an owner and member of the Board of Directors of Coleridge and
Jelniki. Walsh has served on Coleridge’s Board of Directors for thirty years. He also served as
Coleridge’s Managing Director.
When Walsh was deposed, he testified that he visited Greystone’s facility in Kansas City
approximately four times between 1998 and 2005.5 He did not visit Kansas City after 2005. Walsh
testified that Coleridge paid for his travel to Kansas City, and that he made those trips on behalf
of Coleridge.
Walsh stated that he would communicate with Greystone’s General Manager (“GM”)
James Lloyd via phone and electronic mail. When visiting Greystone on the approximate four
occasions,6 Walsh met with Lloyd and would discuss any concerns that Lloyd had. In addition,
Walsh would meet with other Greystone employees. Walsh stated that he had no involvement in
the day-to-day operation of Greystone and did not have the ability to tell Lloyd how to run the
company.
4
The circuit stated that a one-page agreement from March 15, 2007, raised the possibility that Coleridge was
“involved in the day-to-day management of Greystone, or at least in the negotiation of its collective bargaining
agreement.” Id. at 871.
5
In 1998, a company that Coleridge owned merged with another company. The two companies became
Greystone, and Coleridge was the 50 percent owner and retained the right to increase its ownership. In 2002, Coleridge
acquired the remaining 50 percent of Greystone.
6
Lloyd estimated that Walsh traveled to Kansas City approximately five to ten times.
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James Lloyd was the Chief Financial Officer (“CFO”) and General Manager of Greystone.
Lloyd was also on Greystone’s Board of Directors. He was not on Coleridge’s or Jelniki’s board,
and he did not receive any renumeration from Coleridge or Jelniki.
As CFO, Lloyd was responsible for the accounting and books. As GM, Lloyd was
responsible for leading a management team and making decisions related to Greystone’s
production and marketing. Lloyd set the financial goals for Greystone. Walsh could ask questions
about the projections, but he did not offer advice or input. Lloyd approved travel expenses,
equipment purchases, and day-to-day business expenses. He did not need approval from anyone
to make decisions.
Lloyd testified that Greystone sent supplies to Coleridge three or four times. The supplies
were purchased by Greystone in the United States. Lloyd did not know if Coleridge reimbursed
Greystone.
Greystone did not own its facility in Kansas City. It leased it from Greystone Investment
Company. JDV Co. owned Greystone Investment Company. JDV is a wholly owned subsidiary
of Coleridge.
Lloyd and Walsh testified that, in 2000, Coleridge provided a loan to Greystone in the
amount of $250,000.7 Lloyd made the request for a loan to Eugene Reynolds, another owner and
member of the Board of Directors of Coleridge and Jelniki. Lloyd and Reynolds discussed the
terms of the loan. Reynolds testified that JDV Co. made the loan to Greystone. There are no loan
documents. Reynolds and Walsh stated that the loan was expected to be paid back, but Greystone
was never able to make any payments.
7
In 2000, Coleridge had a 50 percent ownership interest in Greystone.
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Reynolds met with Lloyd multiple times a year during the duration of Lloyd’s employment
with Greystone. Reynolds testified that Greystone paid for his flights when he would travel to
Kansas City for business.8 In addition, he testified that he used a Greystone credit card and that
he stayed at an apartment that Greystone paid for.
In 2007, Greystone and union employees negotiated a CBA. Lloyd testified that Reynolds
was involved in the negotiating of the 2006/2007 CBA in an advisory capacity. Lloyd also stated
that he discussed with Reynolds withdrawal liability during the 2006/2007 negotiations. Lloyd
had the ultimate authority to approve a union contract.
There is a one-page agreement, dated March 15, 2007, signed by Reynolds and several
members of the union. In this agreement, it states that “Greystone and Local 16-C have agreed to
a meeting between the Union’s committee and Eugene Reynolds to give the Union the opportunity
to communicate their concerns directly to the owner. The undersigned agree that this meeting is
not a negotiation session and that all comments are off the record.”9
During Reynolds’ deposition, he was asked about this agreement. He stated that he does
not recall that the meeting ever took place. He also stated that “off the record” meant that it was
completely unofficial and that it was not a negotiation session. Reynolds was asked about the
statement communicating their concerns directly to the owner and whether it was accurate that his
8
Lloyd testified that Greystone did not pay for the travel of Reynolds and Walsh, but he was unaware of who
paid for such expenses.
9
The circuit found that this one-page agreement was ambiguous as to the word “owner” and raised the
possibility that Coleridge or Jelniki were involved in the day-to-day management of Greystone or in the negotiation
of its CBA. Id. The circuit also noted, however, that one meeting was “not a sufficient minimum contact to support
the exercise of specific jurisdiction, particularly when the Fund has not alleged how its injuries arose from that
meeting.” Id.
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“capacity in this meeting was as the owner of Greystone.” He responded, “representing the
owners.”
On June 15, 2007, a letter was sent to the union on Greystone letterhead. Reynolds signed
this letter. He stated that someone at Greystone had drafted the letter for Reynolds to send because
communications had broken down and a strike had either started or was imminent.
In 2011, when Greystone withdrew from the Fund, Reynolds was Greystone’s President
and sat on its Board of Directors. Lloyd and Reynolds were involved in the winding down of
Greystone.
Reynolds, through Dollard Packaging, pays for the storage facility in which
Greystone’s corporate records are currently stored. Greystone’s physical assets were auctioned
off when it was winding up. Coleridge and Jelniki did not acquire any of Greystone’s property.
Defendants are again before this Court asserting that the case should be dismissed for lack
of personal jurisdiction.
II.
Legal Standard
A plaintiff opposing a motion to dismiss based on lack of personal jurisdiction bears the
burden of showing that jurisdiction over the defendant is appropriate.10 In a pretrial motion to
dismiss, when the matter is decided on the basis of affidavits and written materials, the plaintiff is
only required to make a prima facie showing that personal jurisdiction is proper to avoid
dismissal.11 Once the plaintiff makes a prima facie showing, the defendant must “present a
10
Thermal Components Co. v. Griffith, 98 F. Supp. 2d 1224, 1227 (D. Kan. 2000) (citing Kuenzle v. HTM
Sport–Und Freizeitgerate AG, 102 F.3d 453, 456 (10th Cir. 1996)).
11
Id.
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compelling case demonstrating ‘that the presence of some other considerations would render
jurisdiction unreasonable.’ ”12
“The allegations in the complaint must be taken as true to the extent they are
uncontroverted by the defendant’s affidavits. If the parties present conflicting affidavits, all factual
disputes must be resolved in the plaintiff’s favor, and the plaintiff’s prima facie showing is
sufficient notwithstanding the contrary presentation by the moving party.”13 “However, only the
well pled facts of plaintiff’s complaint, as distinguished from mere conclusory allegations, must
be accepted as true.”14 “ ‘The plaintiff has the duty to support jurisdictional allegations in a
complaint by competent proof of the supporting facts if the jurisdictional allegations are challenged
by an appropriate pleading.’ ”15
III.
Analysis
Plaintiffs bring a claim for withdrawal liability under ERISA and the MPPAA. Under the
MPPAA, an employer incurs withdrawal liability to a multiemployer plan if the employer partially
or completely withdraws from the plan.16 Pursuant to 29 U.S.C. § 1383(a)(1), a complete
withdrawal occurs if “an employer permanently ceases to have an obligation to contribute under
the plan.” Businesses that are under “common control” are treated as a “single employer” and are
jointly and severally liable for an affiliate business.17
12
Id. (quoting OMI Holdings, Inc. v. Royal Ins. Co. of Canada, 149 F.3d 1086, 1091 (10th Cir. 1998)).
13
Wenz v. Memery Crystal, 55 F.3d 1503, 1505 (10th Cir. 1995) (internal quotations omitted).
14
Id. (citation omitted)
15
Id. at 1508 (quoting Pytlik v. Prof’l Res., Ltd., 887 F.2d 1371, 1376 (10th Cir. 1989)).
16
29 U.S.C. § 1381.
17
See 29 U.S.C. § 1301(b)(1); see also Cent. States, Se. and Sw. Areas Pension Fund v. Phencorp
Reinsurance Co., 440 F.3d 870, 873-74 (7th Cir. 2006) (“For purposes of determining withdrawal liability, ERISA
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Federal Rule of Civil Procedure 4(k)(2) is the basis for personal jurisdiction “[w]hen a
plaintiff’s claims arise under federal law and the defendant is not subject to the jurisdiction of any
state’s court of general jurisdiction.”18 Here, Plaintiff’s claim arises under federal law and there
is no state court that has jurisdiction over Defendants. Under Rule 4(k)(2), a plaintiff must show
that “the exercise of jurisdiction comports with due process.”19 The Due Process Clause of the
Fifth Amendment guides the analysis.20
The relevant question is whether the non-resident defendant had sufficient contacts with
the forum.21 “[A] federal court may exercise specific jurisdiction over a foreign defendant if the
defendant purposefully directed its activities at the forum and the plaintiff’s injuries arose from
the defendant’s forum-related activities.”22 In this case, the forum is the United States in general,
rather than Kansas in particular.
Thus, the appropriate question is whether Defendants
purposefully directed their activities toward the United States, and whether Plaintiffs’ alleged
injuries relate to these forum-related activities. Specifically, the Tenth Circuit remanded the case
to determine whether there is any evidence that Defendants Coleridge or Jelniki, either directly or
through their owners, directors, or agents, were involved in the day-to-day management of
Greystone.
defines an ‘employer’ as the business that directly participates in the plan, as well as those entities that constitute the
business’s ‘control group.’ All entities constituting the control group incur withdrawal liability.”) (citing 29 U.S.C. §
1301(b)(1)).
18
GCIU-Employer Ret. Fund, 700 F. App’x at 867-68.
19
Id. at 868 (citing Holland Am. Line Inc. v. Wartsila N. Am., Inc., 485 F.3d 450, 461 (9th Cir. 2007)).
20
Id.; see also Peay v. Bellsouth Med. Assistance Plan, 205 F.3d 1206, 1210 (10th Cir. 2000).
21
GCIU-Employer Ret. Fund, 700 F. App’x at 868; see also Benton v. Cameco Corp., 375 F.3d 1070, 1075
(10th Cir. 2004).
22
GCIU-Employer Ret. Fund, 700 F. App’x at 868 (citation omitted).
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“[J]urisdiction cannot be premised on corporate affiliation alone even when the claims arise
under the MPPAA.”23 “A holding or parent company has a separate corporate existence and is
treated separately from the subsidiary in the absence of circumstances justifying disregard of the
corporate entity.”24 “Companies conducting business through their subsidiaries can qualify as
transacting business in a state, provided the parent exercises sufficient control over the
subsidiary.”25 Stock ownership, by itself, does not subject the parent corporation to in personum
jurisdiction of the subsidiary corporation.26 A defendant’s contacts with the forum must be
individually considered.27
Plaintiffs contend that Coleridge and Jelniki, through their officers and directors Reynolds
and Walsh, inserted themselves in the day-to-day business of Greystone on behalf of Greystone’s
parent corporations in Ireland (Coleridge and Jelniki). They contend that the following facts
support their argument: (1) Coleridge used Greystone to purchase and acquire supplies in the
United States three or four times and it is unclear whether Coleridge reimbursed Greystone for
these supplies, (2) Coleridge made a $250,000 loan to Greystone in 2000 and it was never repaid,
(3) Coleridge owned the physical building occupied by Greystone, (4) Reynolds participated in a
2006/2007 CBA negotiation involving Greystone’s employees, (5) Reynolds interacted with
Greystone’s GM and CFO Lloyd concerning management and operations of Greystone, and (6)
23
GCUI-Employer Ret. Fund, 700 F. App’x at 870.
24
Benton, 375 F.3d at 1081 (quotation marks and citation omitted).
25
Pro Axess, Inc. v. Orlux Distrib., Inc., 428 F.3d 1270, 1278 (10th Cir. 2005).
26
Quarles v. Fuqua Indus., Inc., 504 F.2d 1358, 1364 (10th Cir. 1974).
27
Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 781 n.13 (1984).
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Walsh had communications with Lloyd and visited at least four times between 1998 and 2005 with
Coleridge paying for Walsh’s travel.
At first, it may appear that these contacts demonstrate that Walsh and Reynolds were
involved in Greystone’s affairs on more than just a peripheral basis. Upon deeper inspection,
however, these contacts are superficial and do not demonstrate day-to-day involvement in
Greystone’s business.
As to the acquisition of supplies, this only occurred three or four times over a thirteen-year
period (1998-2011) in which Coleridge partly or wholly owned Greystone. This fact is not
indicative of Greystone operating on behalf of Coleridge. Indeed, it simply demonstrates that
Greystone sporadically purchased a supply in the United States that Coleridge could not obtain in
Ireland. Nothing about this fact demonstrates day-to-day involvement of Coleridge and Jelniki in
Greystone’s affairs.
In 2000, Coleridge loaned $250,000 to Greystone.28 Generally, “parent financing of the
subsidiary will not make the subsidiary a mere instrumentality.”29 Plaintiffs argue that this loan
shows that Greystone was inadequately capitalized and had to be supported from its parent
company Coleridge. The Court disagrees. This loan occurred in 2000—almost 11 years prior to
Greystone’s demise. At the time of the loan, Coleridge was a 50 percent owner of Greystone.
There is no other evidence that Coleridge provided any other capitalization over the next 11 years.
Furthermore, there is no evidence that the infusion of this money gave Coleridge or Jelniki any
28
Two people testified that Coleridge loaned money to Greystone while a third person testified that JDV (a
subsidiary of Coleridge) loaned the money. The Court will view the fact in the light most favorable to Plaintiffs and
construe the loan to be one from Coleridge.
29
Quarles, 504 F.2d at 1363 (citations omitted).
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control or input over Greystone’s decisions and dealings.30 Finally, the evidence also demonstrates
that Greystone was expected to repay this loan, but it was simply unable to do so.
There also is nothing unusual about Coleridge owning the building that Greystone
occupied. Again, Coleridge is the parent corporation of Greystone, and it may have some
involvement with its subsidiary company or provide some financing. There is no requirement that
it have no involvement. In this instance, the evidence demonstrates that Greystone leased the
building from another one of Coleridge’s companies.31 There is no evidence that Greystone did
not pay for its lease nor is there any evidence that there was anything improper in the way in which
the lease was structured. Nor is there any evidence of how this fact would demonstrate that
Coleridge or Jelniki were involved in Greystone’s daily operations or exerted any control over
Greystone’s daily operations.
As to Eugene Reynolds’ interactions with Greystone, he was a member of Greystone’s
board and its president. He was also an owner of Coleridge and Jelniki and on their boards of
directors. “The [common] identity of officers and directors is insufficient to allow corporate veil
piercing.”32 It is a well-established principle that “directors and officers holding positions with a
parent and its subsidiary can and do ‘change hats’ to represent the two corporations separately,
despite their common ownership.”33 Here, there is still no credible evidence that any actions
30
See Cotracom Commodity Trading AG v. Seaboard Corp., 94 F. Supp. 2d 1189, 1196 (D. Kan. 2000)
(noting that there was insufficient evidence of a subsidiary’s undercapitalization or of a parent’s control over the
subsidiary with financing to justify treating the subsidiary and the parent as one corporation).
31
Greystone Investment Company was owned by JDV, Co. (which was also owned by Coleridge).
32
Lowell Staats Mining Co. v. Pioneer Uravan, Inc., 878 F.2d 1259, 1263 (10th Cir. 1989) (citations omitted).
33
United States v. Bestfoods, 524 U.S. 51, 69 (1998) (quotation marks and citation omitted).
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Reynolds took when he discharged his duties as an officer of Greystone were on behalf of
Coleridge and/or Jelniki.
With regard to the March 15, 2007, one-page document stating that a meeting would be set
up for union members to communicate their concerns directly to the owner, there is no additional
evidence demonstrating that Coleridge and Jelniki were involved in the day-to-day management
of Greystone.34 The letter itself states that it would not be a negotiating session and that it would
be off the record. In addition, Reynolds testified that he does not recall that the meeting ever
happened. This letter is the only evidence that Reynolds acted on behalf of Coleridge and Jelniki.
Plaintiffs cannot point to any evidence that this meeting ever occurred. Finally, the evidence
demonstrates that Lloyd had the ultimate authority to approve a union contract and that Lloyd did
not need approval from anybody else (from Coleridge or Jelniki) to make decisions on behalf of
Greystone.
Plaintiffs contend that Reynolds and Walsh both gave advice and guidance to Greystone
and thus were actively participating in the business of Greystone. However, Walsh testified that
he only visited Greystone approximately four times during the 12 years of Coleridge and Jelniki
ownership of Greystone. In addition, the last time Walsh visited was in 2005—almost six years
before Greystone went out of business. Thus, there were approximately six years of no interaction
by Walsh with Greystone. With regard to Reynolds, there are more interactions between him and
Lloyd. However, there is no evidence that these interactions were on behalf of Coleridge and
Jelniki. Instead, the evidence shows that Reynolds’ contacts occurred in his capacity as one of
34
This one-page agreement is the one in which the Tenth Circuit found ambiguous as to whether Coleridge
and Jelniki could be involved in the day-to-day operations of Greystone.
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Greystone’s directors.
The “monitoring [of a] subsidiary’s performance, supervising the
subsidiary’s finance and capital budget decisions, and articulating general policies” does not
generally “rise to the level necessary to impute the subsidiary’s jurisdictional contacts to the
parent.”35
Thus, even if Reynolds and Walsh did monitor and consult with Lloyd about
Greystone’s performance, there is no evidence that this involvement amounted to Coleridge and
Jelniki being involved in the daily affairs of Greystone. In sum, there is no additional evidence
that Coleridge and Jelniki were involved in the day-to-day management of Greystone or in the
negotiation of the CBA.
Furthermore, to exercise “specific jurisdiction over a foreign defendant,” the defendant
must have “purposefully directed its activities at the forum and the plaintiff’s injuries [must have
arisen] from the defendant’s forum-related activities.”36 Plaintiffs’ injury arose because Greystone
went out of business and withdrew from the fund. There is no evidence that Plaintiffs’ injuries
arose from Reynolds’ and Walsh’s limited contacts (on behalf of Coleridge and Jelniki) with the
United States. Thus, the Court finds that there are insufficient minimum contacts by Defendants,
and the exercise of personal jurisdiction does not comport with due process.
35
City of Greenville v. Sygenta Crop Prot., Inc., 830 F. Supp. 2d 550, 555-56 (S.D. Ill. 2011) (citing 16 James
Wm. Moore et al., Moore’s Federal Practice § 108.42[3][b] (3d ed. 2011)).
36
GCIU-Employer Ret. Fund, 700 F. App’x at 868 (emphasis added) (citation omitted).
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IT IS THEREFORE ORDERED that Defendants’ Motion to Dismiss (Doc. 39) is hereby
GRANTED.
IT IS SO ORDERED.
Dated this 8th day of July, 2019.
ERIC F. MELGREN
UNITED STATES DISTRICT JUDGE
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