CENTRAL STATEES SOUTHEAST & SOUTHWEST AREAS PENSION FUND ET AL v. CARGO CARRIERS, INC. ET AL

Filing 73

MEMORANDUM OPINION, RECOMMENDATION, AND ORDER OF UNITED STATES MAGISTRATE JUDGE signed by MAG/JUDGE L. PATRICK AULD on 7/22/2013; that Plaintiffs' Motion for Leave to File Amended Complaint (Docket Entry 65 ) is GRANTED. Plaintiffs shal l file an Amended Complaint in substantially the same form as Exhibit A to their instant Motion for Leave by July 29, 2013. FURTHER that Plaintiffs' Motion to Strike (Docket Entry 66 ) is DENIED as moot. RECOMMENDED that Defendant Cargo Carriers' Motion to Dismiss (Docket Entry 59 ) be denied as moot. FURTHER RECOMMENDED that Individual Defendants' Motion to Dismiss (Docket Entry 61 ) be denied (in part as moot). (Sheets, Jamie)

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
CENTRAL STATES SOUTHEAST AND
SOUTHWEST AREAS PENSION FUND, and
ARTHUR H. BUNTE, JR., Trustee,

)
)
)
)
Plaintiffs,
)
)
v.
)
)
CARGO CARRIERS, INC., a dissolved )
North Carolina Corporation, DONALD )
C. FISHER, MARY R. FISHER, IRVIN
)
W. ALBERT, MICHAEL S. ALBERT,
)
EDGAR B. HINKLE, JR., JULIUS S.
)
YOUNG, and CHARLES J. YOUNG,
)
)
Defendants.
)

1:11CV461

MEMORANDUM OPINION, RECOMMENDATION, AND ORDER
OF UNITED STATES MAGISTRATE JUDGE
This

matter

comes

before

the

undersigned

United

States

Magistrate Judge on the following motions: (1) Defendant Cargo
Carriers, Inc.’s Motion to Dismiss Pursuant to Rule 12(b)(6)
(Docket Entry 59); (2) Motion to Dismiss of Defendants Donald C.
Fisher, Mary R. Fisher, Michael S. Albert, Irvin W. Albert, Edgar
B. Hinkle, Jr., Julius S. Young, and Charles J. Young for Failure
to State a Claim Pursuant to Rule 12(b)(6) (Docket Entry 61);
(3) Plaintiffs’ Motion for Leave to File Amended Complaint (Docket
Entry 65); and (4) Plaintiffs’ Motion to Strike or Extend the May
7 Response Deadline with Respect to Defendants’ Motions to Dismiss
(Docket Entry 66). For the reasons that follow, Plaintiffs’ Motion
for Leave to Amend will be granted, Plaintiffs’ Motion to Strike
will be denied as moot, and Defendants’ Motions to Dismiss should
be denied.

I.

Factual Background

The Complaint identifies Plaintiffs as a multiemployer pension
fund (“the Pension Fund”) and one of its current trustees. (Docket
Entry 1, ¶¶ 4-5.)

According to the Complaint, Defendant Cargo

Carriers is a dissolved North Carolina corporation.

(Id. ¶ 7.)

The Complaint identifies the remaining defendants aa individuals
(“Individual Defendants”) involved in the ownership and management
of

Cargo

Carriers.

(Id.

¶¶

12-19,

26-27,

44-45,

48-49.)

Plaintiffs brought this action against Defendants for “collection
of

withdrawal

liability,

interest,

and

penalties

incurred

by

[Defendants] as a result of withdrawal from a multiemployer pension
plan.”

(Id. ¶ 1.)

Under the Multiemployer Pension Plan Amendment Act (“MPPAA”),
when an employer withdraws from a multiemployer pension plan, “it
must pay withdrawal liability in an amount roughly equal to its
proportionate share of the plan’s unfunded vested benefits . . . .”
(Docket Entry 65, ¶ 5 (citing Connolly v. Pension Benefit Guar.
Corp., 475 U.S. 211, 217 (1986), and 29 U.S.C. §§ 1381, 1391);
accord Docket Entry 69 at 1.)

All “trades or businesses under

‘common control’ are treated as constituting a single ‘employer’
for withdrawal liability purposes, and each such trade or business
is jointly and severally liable for the withdrawal liability.”
(Docket Entry 65, ¶ 5 (citing Teamsters Joint Council No. 83 v.
Centra, Inc., 947 F.2d 115, 120 (4th Cir. 1991); accord Docket
Entry 69 at 2.)

In order to be considered a “trade or business”

for purposes of the MPPAA, an organization must “engage[] in an
-2-

activity (1) with continuity and regularity and (2) for the primary
purpose of income or profit.”

Central States, Se. & Sw. Areas

Pension Fund v. SCOFBP, LLC, 668 F.3d 873, 878 (7th Cir. 2011)
(citing Commissioner of Internal Revenue v. Groetzinger, 480 U.S.
23, 35 (1987)).
The Complaint alleges that Billings Freight, a North Carolina
corporation, was “bound by collective bargaining agreements with
local unions affiliated with the International Brotherhood of
Teamsters

under

which

Billings

Freight

was

required

to

make

contributions to the Pension Fund on behalf of certain of its
employees.”

(Docket Entry 1, ¶ 20.)

Billings Freight allegedly

was a wholly owned subsidiary of Billings Transportation (id.
¶ 21), as was Billings Express (id. ¶ 23).

The Complaint asserts

that
for a period of time before September 2005 . . . until
around
September
2005
when
Talmadge
Silversides
transferred her shares of stock in Cargo Carriers . . .,
Cargo Carriers was a trade or business under common
control with Billings Transportation, Billings Freight,
Billings Express and Metro Motor [“the Billings
Controlled Group” or “the Group”] within the meaning of
section 4001(b)(1) of ERISA, 29 U.S.C. § 1301(b)(1), and
the regulations promulgated thereunder.
(Id. ¶ 28.)

Put differently, the same individuals “collectively

owned at least 80 percent of the total combined voting power of all
classes of stock entitled to vote . . . and/or at least 80 percent
of the total value of shares of all classes of stock” of each
entity making up the controlled group.
In

September

of

2005,

(Id. ¶¶ 22, 24, 26.)

Talmadge

Silversides

allegedly

“transferred her shares of stock in Cargo Carriers to her children,
-3-

Defendants Donald Fisher and Mary Fisher” (id. ¶ 27), thereby
causing Cargo Carriers to “cease being under common control with
Billings Transportation, Billings Freight, Billings Express and
Metro Motor . . .” (id. ¶ 30).

The Complaint alleges that a

“principal purpose” of the stock transfer was “to cause Cargo
Carriers to evade or avoid withdrawal liability owed by Cargo
Carriers to the Pension Fund.”

(Id.)

As a result, according to

the Complaint, “[p]ursuant to section 4212(c) of ERISA, 29 U.S.C.
§ 1392(c), the 2005 transfer of stock of Cargo Carriers by Talmadge
Silversides to Defendants Donald Fisher and Mary Fisher may be
disregarded in determining and collecting the withdrawal liability
owed by” the Billings Controlled Group, including Cargo Carriers.
(Id. ¶ 31.)1
On July 2, 2006, the Billings Controlled Group allegedly
“effect[ed] a ‘complete withdrawal’ from the Pension Fund within
the meaning of section 4203 of ERISA, 29 U.S.C. § 1383” (id. ¶ 34),
incurring withdrawal liability in the amount of $18,063,796.63 (id.
¶ 35).

Because, according to the Complaint, the September 2005

transaction by Talmadge Silversides may be disregarded, Plaintiffs
contend that Cargo Carriers remained a member of the Billings
Controlled Group for purposes of the MPPAA when the Group incurred
liability on July 2, 2006.

(Id. ¶¶ 32-35.)

1

Section 1392(c) states: “If a principal purpose of any
transaction is to evade or avoid liability under this part, this
part shall be applied (and liability shall be determined and
collected) without regard to such transaction.”
-4-

The Complaint alleges that the Billings Controlled Group
received at least two demands for payment from the Pension Fund in
August of 2006, to which the Group did not respond.
39.)

(Id. ¶¶ 36-

The Group failed to “timely initiate arbitration pursuant to

section 4221(a)(1) of ERISA, 29 U.S.C. § 1401(a)(1)” (id. ¶ 38)
and, as a result, fell into default (id. ¶ 39).

The Complaint

claims that “[a]ll members of the Billings Controlled Group,
including Defendant Cargo Carriers, are jointly and severally
liable to the Pension Fund for the withdrawal liability.”

(Id.

¶ 40.)
Since

2006,

Billings

Transportation,

Billings

Freight,

Billings Express, and Metro Motor have been “debtors in jointly
administered Chapter 7 bankruptcy cases which have been proceeding
in the United States Bankruptcy Court for the Middle District of
North Carolina.”

(Id. ¶ 41.)

The Complaint further asserts that,

“[b]y no later than December 31, 2006, Cargo Carriers had actual
knowledge of the notice and demand for payment of withdrawal
liability issued by the Pension Fund to the Billings Controlled
Group.”

(Id. ¶ 50.)

As a result of the foregoing allegations, Plaintiffs now
pursue claims in this Court for: (1) defaulted withdrawal liability
against Cargo Carriers (Count I); (2) withdrawal liability against
Individual Defendants under the MPPAA’s evade-or-avoid provision
(Count II); (3) withdrawal liability against Individual Defendants
under a trust fund theory (Count III); and (4) liability against
Individual Defendants for fraudulent conveyances (Count IV).
-5-

II.

Procedural Background

This case originated in the United States District Court for
the

Northern

District

of

Illinois.

(See

Docket

Entry

1.)

Individual Defendants moved to dismiss for lack of jurisdiction and
failure to state a claim pursuant to Fed. R. Civ. P. 12(b)(6).
(Docket Entry 18.)

Defendant Cargo Carriers also moved to dismiss

for failure to state a claim (Docket Entry 20) and sought a change
of venue (Docket Entry 16). Plaintiffs responded. (Docket Entries
31, 32.)

Defendant Cargo Carriers replied.

(Docket Entries 33,

35.) The United States District Court for the Northern District of
Illinois thereafter transferred the case to this Court.

(Docket

Entry 40.)
Defendants re-filed their instant Motions to Dismiss before
this Court.

(Docket Entries 59, 61.)

Plaintiffs then filed their

instant Motion for Leave to File Amended Complaint.
65.)

(Docket Entry

Plaintiffs then moved to strike the deadline for their

response to the Motions to Dismiss or to extend it pending a ruling
on their Motion for Leave.

(Docket Entry 66, ¶ 6.)

objected to the Motion to Strike.

(Docket Entry 67.)

Defendants
Plaintiffs

nevertheless timely responded to the instant Motions to Dismiss.
(Docket Entry 68.)

Defendants likewise responded to Plaintiffs’

Motion for Leave.

(Docket Entry 69.)

replies.

(Docket Entries 70, 71.)

-6-

Both sides also filed

III.
A.

Discussion

Motion for Leave to File Amended Complaint (Docket Entry 65)
Plaintiffs request leave to amend their Complaint to include

further allegations supporting their contention that Cargo Carriers
qualified as a trade or business and to add new defendants.
(Docket Entry 65, ¶¶ 9-13.)

Defendants oppose such action on

grounds of undue delay and futility.

(Docket Entry 69 at 8-15.)

Rule 15(a) of the Federal Rules of Civil Procedure appears to
entitle Plaintiffs to amend their Complaint as a matter of course.
It states:
A party may amend its pleading once as a matter of course
within:
. . .
(B)if the pleading is one to which a responsive pleading
is required, 21 days after service of a responsive
pleading or 21 days after service of a motion under Rule
12(b), (e), or (f), whichever is earlier.
Fed. R. Civ. P. 15(a)(1)(B). Plaintiffs filed their instant Motion
for Leave ten days after Defendants filed their instant Motions to
Dismiss pursuant to Rule 12(b)(6), well within the 21-day time
period allowed for amendment as a matter of course.

Nothing in

Rule 15(a) indicates that a plaintiff may not amend a pleading
where, as here, the dismissal motions were refiled upon transfer to
a new court.

According to the advisory committee notes on the

amendment to Rule 15(a) that added the provision allowing amendment
once as a matter of course following a motion under Rule 12(b),
“[a] responsive amendment may avoid the need to decide the motion
or reduce the number of issues to be decided, and will expedite
-7-

determination of issues that otherwise might be raised seriatim.
It also should advance other pretrial proceedings.”

Fed. R. Civ.

P. 15(a)(1) advisory committee’s notes, 2009 Amend.

Allowing

amendment as a matter of course in the instant case will further
those goals.
Alternatively, the Court (per the undersigned Magistrate
Judge)2 grants Plaintiffs leave to amend their Complaint even if
they may “amend [their] pleading only with . . . the [C]ourt’s
leave.”

Fed. R. Civ. P. 15(a)(2).

Under that provision, “[t]he

[C]ourt should freely give leave when justice so requires.”

Id.

This standard permits the Court some discretion, “but outright
refusal to grant the leave without any justifying reason appearing
for the denial is not an exercise of discretion.”
371 U.S. 178, 182 (1962).

Foman v. Davis,

Indeed, “[t]he law is well settled that

leave to amend a pleading should be denied only when the amendment
would be prejudicial to the opposing party, there has been bad
faith on the part of the moving party, or the amendment would be

2

For reasons stated in Deberry v. Davis, No. 1:08CV582,
2010 WL 1610430, at *7 n. 8 (M.D.N.C. Apr. 19, 2010) (unpublished),
the undersigned United States Magistrate Judge will enter an order,
rather than a recommendation, regarding Plaintiffs’ instant Motion
for Leave. See also Everett v. Prison Health Servs., 412 F. App’x
604, 605 & n. 2 (4th Cir. 2011) (“Everett moved for leave to amend
her complaint . . . to add . . . a defendant based on information
obtained during discovery, and to add a state-law claim of medical
malpractice against [that new defendant]. After a hearing, the
magistrate judge denied Everett’s motion. Everett timely objected,
thereby preserving the issue for review by the district court. . .
. [T]he district court could not modify or set aside any portion
of the magistrate judge’s order unless the magistrate judge’s
decision was ‘clearly erroneous or contrary to law.’ Fed. R. Civ.
P. 72(a); 28 U.S.C.A. § 636(b)(1)(A) (2006 & Supp. 2010).”).
-8-

futile.” Edwards v. City of Goldsboro, 178 F.3d 231, 242 (4th Cir.
1999).
1.

Undue Delay

Defendants contend that “Plaintiffs have had actual knowledge
of the material that they now want to add since no later than July
31, 2008 . . . .”

(Docket Entry 69 at 9.)

They allege that

it is [therefore] undue delay for [Plaintiffs] to wait
nearly 4 years after the depositions [from which
Plaintiffs obtained the material], and also more than 17
months after filing the original Complaint, to attempt to
include it [in] an Amended Complaint . . ., particularly
after they have taken the position that their original
Complaint is sufficient.
(Id.)
“Delay alone is an insufficient reason to deny leave to amend.
Rather, the delay must be accompanied by prejudice, bad faith, or
futility.”

Edwards, 178 F.3d at 242 (internal citations omitted)

(citing Johnson v. Oroweat Foods Co., 785 F.2d 503, 509 (4th Cir.
1986)).

Defendants do not assert any prejudice or bad faith as a

result of the delay in this case.

Rather, they rely on Logar v. W.

Va. Univ. Bd. of Governors, No. 1:10CV201, 2012 WL 243692 (N.D.W.
Va. Jan. 25, 2012) (unpublished), in which the court denied a
motion for leave to amend on the grounds of undue delay.
In Logar, however, plaintiffs moved to amend their complaint
after entry of judgment against them.

Id. at *1.

The court noted

that, although the Fourth Circuit rule treating delay alone as an
insufficient reason to deny leave to amend applies even in postjudgment situations, “the post-judgment climate is a major factor
in the consideration of the other factors relevant to the inquiry,
-9-

most especially those of bad faith and prejudice to the opposing
party.”

Id. at *4 (citing Laber v. Harvey, 438 F.3d 404, 427 (4th

Cir. 2006), and Adams v. Gould, 739 F.2d 858, 864 (3d Cir. 1984)).
The court further pointed out that
unexcused delay in filing a motion for leave to amend
[is] a sufficient basis for post-judgment denial of such
a motion because, “much of the value of summary judgment
procedure . . . would be dissipated” if a movant were
allowed to rely on one theory until the district court
finds that theory “unsound,” then to return with another
theory after unfavorable judgment is entered.
Id. at *5 (emphasis added) (quoting Vielma v. Eureka Co., 218 F.3d
458, 469 (5th Cir. 2000)).

The court cited “undue, unexcused

delay, as well as prejudice to the opposing parties” in finding
that the interests of justice “weigh[] in favor of the finality of
the judgment” and denial of leave to amend.

Id. at *10.

The concerns expressed by the court in Logar do not justify
the same result in the instant case.

Here Plaintiffs filed their

instant Motion for Leave just ten days after Defendants filed their
instant Motions to Dismiss.

(See Docket Entries 59, 61, 65.)

Although the Parties had fully briefed matching motions in the
Northern District of Illinois, that court rendered no decision.
Defendants’ arguments regarding undue delay thus do not warrant
denial of Plaintiffs’ instant Motion for Leave.
2.

Futility

Defendants assert that Plaintiffs’ proposed amendments “still
do not sufficiently allege that Cargo Carriers was a trade or
business [within the meaning of 29 U.S.C. § 1301(b)(1)] at the time
of withdrawal on July 2, 2006.”

(Docket Entry 69 at 9-10.)

-10-

For

this reason, they argue that “leave to [] amend the Complaint []
should be denied on the grounds of futility.”

(Id. at 13.)

“An amendment would be futile if the amended claim would fail
to survive a motion to dismiss for failure to state a claim
pursuant to Federal Rule of Civil Procedure 12(b)(6).”

Syngenta

Crop Prod., Inc. v. EPA, 222 F.R.D. 271, 278 (M.D.N.C. 2004).

A

plaintiff fails to state a claim when the complaint does not
“contain sufficient factual matter, accepted as true, to ‘state a
claim to relief that is plausible on its face.’”

Ashcroft v.

Iqbal, 556 U.S. 662, 678 (2009) (internal citations omitted)
(quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
“Where a complaint pleads facts that are ‘merely consistent with’
a defendant’s liability, it ‘stops short of the line between
possibility and plausibility of ‘entitlement to relief.’”
(quoting Twombly, 550 U.S. at 557).

Id.

This standard “demands more

than an unadorned, the-defendant-unlawfully-harmed-me accusation.”
Id.

In other words, “the tenet that a court must accept as true

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

action,

suffice.”

Threadbare recitals of the elements of a cause

supported

Id.3

by

mere

conclusory

statements,

do

not

“Leave to amend, however, should only be denied on

3

“[D]etermining whether a complaint states on its face a
plausible claim for relief and therefore can survive a Rule
12(b)(6) motion . . . requires the reviewing court to draw on its
judicial experience and common sense.” Francis v. Giacomelli, 588
F.3d 186, 193 (4th Cir. 2009). Of course, in applying the Rule
12(b)(6) standard while reviewing a proposed amendment for
futility, the question of “[w]hether [a litigant’s] allegations
(continued...)
-11-

the ground of futility when the proposed amendment is clearly
insufficient or frivolous on its face.”

Johnson, 785 F.2d at 510

(citing Davis v. Piper Aircraft Corp., 615 F.2d 606, 613 (4th Cir.
1980)).
In their proposed Amended Complaint, Plaintiffs allege that,
“[a]t all times from before 2000 through at least the July 2, 2006
date of withdrawal, Cargo Carriers was a trade or business.”
(Docket Entry 65-1, ¶ 49.)

In addition, Plaintiffs assert that

Cargo Carriers still engaged in a number of business functions at
the time of withdrawal “with the purpose of generating income
and/or profit.”

(Id. ¶¶ 50, 52.)

Plaintiffs also claim that

“Cargo Carriers did not file for dissolution until 2008.”
¶ 51.)

(Id.

Defendants maintain that “[t]hese proposed allegations

still do not amount to an effective allegation that Cargo Carriers
continually and regularly conducted business activity for the
purpose of income or profit on July 2, 2006.”

(Docket Entry 69 at

11.)
Plaintiffs’

proposed

Amended

Complaint

insufficient or frivolous on its face.”

is

not

“clearly

Johnson, 785 F.2d at 510.

Whether an enterprise is a “trade or business” within the meaning
of 29 U.S.C. § 1301(b)(1) “is a question of fact.”

Connors v.

Incoal, Inc., 995 F.2d 245, 251 (D.C. Cir. 1993) (citing Central

3

(...continued)
. . . are ultimately provable or accurate is not an issue before
the Court,” Kinetic Concepts, Inc. v. ConvaTec Inc., No. 1:08CV918,
2010 WL 1427592, at *11 n.10 (M.D.N.C. Apr. 8, 2010) (unpublished)
(internal quotation marks omitted).
-12-

States, Se. & Sw. Areas Pension Fund v. Slotky, 956 F.2d 1369, 1373
(7th Cir. 1992)).

Despite Defendants’ contentions, Plaintiffs’

amendments allege sufficient facts to support their contention that
Cargo Carriers was a “trade or business” at the time of withdrawal.
Defendants rely on Connors v. Incoal Inc., No. 89-7058, 907
F.2d 1227 (Table), 1990 WL 102739 (D.C. Cir. July 20, 1990)
(unpublished), for the assertion that “‘a business in its phase-out
stages [cannot be held] liable for debts incurred by another firm
with which it no longer conducted business.’”

(Docket Entry 69 at

12 (quoting Connors, 1990 WL 102739, at *3).) However, in Connors,
the

plaintiffs

themselves

alleged

that

the

only

action

the

defendant partnership was undertaking at the time of withdrawal was
“distribut[ion of] its partnership assets, an administrative task
typically

associated

with

winding

Connors, 1990 WL 102749, at *3.

up

of

business

affairs.”

The partnership dissolved two

months before the withdrawal date, and the court held that a
partnership in such a position is “liable only for pre-dissolution
debts.”

Id.

In the instant case, on the other hand, Plaintiffs allege
that, “[a]t all times from before 2000 through at least the July 2,
2006 date of withdrawal, Cargo Carriers was a trade or business.”
(Docket Entry 65-1, ¶ 49.)

They further allege that

during [the] entire time period from even before 2000 and
continuing past July 2, 2006 and into 2008, Cargo
Carriers continually and with regularity performed
various business functions, including but not limited to
the following: . . . maintained its status as a North
Carolina corporation from before 2000 and past July 2,
2006; employed corporate officers from before 2000 and
-13-

past July 2, 2006; maintained at least one bank account
from before 2000 and past July 2, 2006; invoiced
companies, pursued collection of accounts receivable and
collected accounts receivable from before 2000 and past
July 2, 2006; [and] liquidated assets beginning in or
around August 2005 and made distributions to shareholders
from 2005 and past July 2, 20[0]6 . . . .
(Id. ¶ 50.)

In addition, Plaintiffs assert that “Cargo Carriers

carried out all of the business functions referenced in paragraph
50 above with the purpose of generating income and/or profit” (id.
¶ 52), and that “Cargo Carriers did not file for dissolution until
2008” (id. ¶ 51).
Defendants further point to cases in which courts determined
that certain of the business activities Plaintiffs ascribe to Cargo
Carriers fail to constitute conduct of a trade or business.
(Docket Entry 69 at 10-12.)4

However, none of these cases support

4

For example, in Central States, Se. & Sw. Areas Pension
Fund v. SCOFBP, LLC, 738 F. Supp. 2d 840 (N.D. Ill. 2010), aff’d,
668 F.3d 873 (7th Cir. 2011), the court pointed out that the
Seventh Circuit declined to adopt a per se rule that formal
business organizations are “trades or businesses.”
Id. at 848
(citing McDougall v. Pioneer Ranch Ltd. Partnership, 494 F.3d 571,
577 (7th Cir. 2007)). It noted, however, that the Seventh Circuit
did find the existence of a formal partnership “‘highly relevant,’”
as it “‘stated the intention of forming a business’ and
‘constitute[d] a declaration against interest.’”
Id. (quoting
McDougall, 494 F.3d at 577-78). Defendants also rely on Government
Dev. Bank for P.R. v. Holt Marine Terminal, Inc., 765 F. Supp. 2d
710 (E.D. Pa. 2011), which they state stands for the proposition
that evidence that a company “‘went dormant’ and no longer
conducted construction activities at the time of withdrawal . . .
was enough to support a finding that the company was not ‘an active
trade or business at the time [the plaintiff] incurred withdrawal
liability.” (Docket Entry 68 at 11 (quoting Government Dev. Bank,
765 F. Supp. 2d at 716).) However, the court in that case was
considering the plaintiffs’ motion for summary judgment.
Government Dev. Bank, 765 F. Supp. 2d at 712. The court merely
determined that “reasonable jurors could differ on the question of
whether [the defendant] was an active trade or business” at the
(continued...)
-14-

Defendants’ contention that Plaintiffs’ assertions, taken together,
fail to provide sufficient factual support for their claims.

In

sum, Plaintiffs have alleged factual matter adequate to sustain
their assertion that Defendant Cargo Carriers qualified as a “trade
or business” at the time of withdrawal, such that, on that issue,
Plaintiffs’ instant Motion for Leave does not fail on grounds of
futility.
Defendants additionally contend that Plaintiffs’ proposed
addition

of

Southmont

Farm,

Southmont

Properties,

Talmadge

Silversides, and Sidney Beck as parties fails on futility grounds.
(Id. at 13-15.)

Defendants’ futility claim as to the addition of

these defendants rests on Defendants’ contention that paragraph 79
of Plaintiffs’ proposed Amended Complaint (stating that Individual
Defendants “collectively owned at least 80 percent of the profits
interest

and/or

capital

interest

Southmont Farm”) “is false.”
standard

assesses

whether

of

the

(Id. at 13.)

the

amended

general

partnership

As the applicable

complaint

“contain[s]

sufficient factual matter, accepted as true, to ‘state a claim to
relief that is plausible on its face,’” Iqbal, 556 U.S. at 678
(emphasis added) (internal citations omitted) (quoting Twombly, 550
U.S. at 570), Defendants’ challenge in this regard lacks merit.

4

(...continued)
time of withdrawal, rendering it “unable to grant summary judgment
to the plaintiffs . . . .” Id. at 716.
-15-

B.

Motions to Dismiss (Docket Entries 59, 61)

In their Motion to Strike or Extend the May 7 Response
Deadline with Respect to Defendants’ Motions to Dismiss (Docket
Entry 66), Plaintiffs argue that, “[a]ssuming the Court grants
Plaintiffs’ Motion to Amend Complaint, the Defendants’ Motions to
Dismiss will become moot.”

(Id. ¶ 6.)

Defendants’ response to

this assertion states, in its entirety:
Plaintiffs’ pending Motion to Amend Complaint ([Docket
Entry] 65), filed on April 23, 2012, seeks to add
allegations in an attempt to address Defendants’ Motions
to Dismiss, of which Plaintiffs have been fully informed
since March 1, 2011. Plaintiffs have already argued in
their original Responses to Defendants’ Motions to
Dismiss that no new allegations are necessary to state a
claim for relief.
Defendants’ response to Plaintiffs’ Motion to Amend
Complaint is due on May 17, 2012. Defendants will oppose
Plaintiffs’ Motion to Amend Complaint.
(Docket Entry 67, ¶¶ 9-10 (internal paragraph numbering omitted).)
For reasons detailed in Kinetic Concepts, Inc. v. ConvaTec
Inc., No. 1:08CV00918, 2010 WL 1667285, at *6-8 & nn. 12, 13
(M.D.N.C. Apr. 23. 2010) (unpublished), Defendants’ failure to
respond

to

Plaintiffs’

argument

regarding

the

effect

of

the

proposed Amended Complaint on the Motions to Dismiss constitutes a
concession.
concerning

Moreover,
futility,

as

discussed

Plaintiffs’

in

the

proposed

previous
Amended

section

Complaint

adequately addresses Defendant Cargo Carriers’ contentions (echoed
in Individual Defendants’ Motion to Dismiss (Docket Entry 62 at 4))
regarding the status of Cargo Carriers as a “trade or business” at

-16-

the time of withdrawal, which contentions represent Cargo Carriers’
only argument in its Motion to Dismiss.
The

only

challenge

apparently

(Docket Entry 60 at 5-8.)

not

rendered

moot

by

the

proposed Amended Complaint concerns Individual Defendants’ claim in
their Motion to Dismiss that they cannot be held liable under a
theory of “evade or avoid” liability as set out in Count II of the
Complaint.

(Docket Entry 62 at 5-10.)

Individual Defendants

assert that “Plaintiffs’ claims to recoup assets of Cargo Carriers
[distributed to Individual Defendants] necessarily depend first
upon whether [Plaintiffs] obtain a judgment against Cargo Carriers.
In other words, the Plaintiffs’ claims against the Individual
Defendants are not direct.”

(Id. at 5.)

Individual Defendants

point to a number of cases to support their claim that “ERISA does
not provide an enforcement mechanism for collecting judgments.”
(Id. at 6 (citing Peacock v. Thomas, 516 U.S. 349, 353 (1996).)
They further state that “29 U.S.C. 1392(c) does not establish an
independent cause of action for ‘evade or avoid liability.’” (Id.
at 7.)
Individual Defendants cite a number of somewhat analogous
cases to support their argument that Section 1392(c) exists to
“deal with circumstances in which a transaction has fractured a
controlled group, and not with situations in which the pension plan
is pursuing shareholders for alleged fraudulent conveyances” (id.
at 8-9) and that “Section 1392(c) must not be stretched too far”
(id. at 9).

The undersigned Magistrate Judge, however, finds

persuasive two cases presented by Plaintiffs that address the exact
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situation raised by Count II, IUE AFL-CIO Pension Fund v. Herrmann,
9 F.3d 1049 (2d Cir. 1993), and Board of Trustees, Sheet Metal
Workers’ Nat’l Pension Fund v. Illinois Range, Inc., 186 F.R.D. 498
(N.D. Ill. 1999).
In the first of these cases, the Second Circuit reversed the
district court’s judgment against plaintiffs for lack of subject
matter jurisdiction over non-employer defendants. Herrmann, 9 F.3d
at 1055-56.

The employer that contributed to the pension fund

entered into an acquisition agreement with another entity by which
that entity “purchased [the employer’s] assets, but did not assume
liability, actual or contingent, whatsoever, including, without
limitation, for any withdrawal liability of [the employer] under
any multiemployer pension plan.”

Id. at 1053 (internal quotation

marks omitted). The president and sole shareholder of the employer
received a signing bonus, service arrangement, payment for a
covenant

not

to

compete,

and

an

extra

bonus.

Id.

These

transactions rendered the employer insolvent, allegedly for the
purpose of evading or avoiding withdrawal liability.

Id.

In

responding to the determination by the lower court that the
president and buyer did not constitute employers under the MPPAA,
the Second Circuit held:
Reading sections 1451(a)(1) and 1392(c) together, if a
pension fund (such as the Fund in this case) is adversely
affected by the acts of any party who has attempted to
“evade or avoid liability” under the MPPAA (such as [the
employer and two non-employer defendants]), then the
MPPAA shall be applied “without regard to such
transaction.”
To calculate and collect liability,
“without regard to such transaction,” any assets that
were transferred in order to “evade or avoid liability,”
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as well as the parties to whom they were improperly
transferred, must be within the reach of the statute.
Further, to apply the MPPAA “without regard to such
transaction,” the transferor entity must be deemed to be
in possession of improperly transferred assets. Those
assets must therefore be recoverable from the parties to
whom they have been illegitimately transferred. Those
parties thus become “part[ies] under this subtitle”
within the meaning of § 1451(a)(1).
Id. at 1056 (emphasis in original).
“The allegations in th[e second] case assert[ed] that it was
an affirmative act of the [employer’s] shareholders that induced
the withdrawal liability of the corporation and that act was
motivated

by

the

shareholders

withdrawal liability.”

attempting

to

evade

and

avoid

Illinois Range, 186 F.R.D. at 501.

Given

those circumstances, the court determined that, “as dictated by 29
U.S.C. § 1392 and 29 U.S.C. § 1451, liable parties are not limited
to employers.” Id. Following the reasoning in Herrmann, the court
determined that the “[i]ndividual [d]efendants are parties within
the jurisdiction of the court because they are ‘any party’ whose
acts have adversely affected the fund.”

Id. (quoting 29 U.S.C.

§ 1451).
As in the previously discussed cases, Plaintiffs have alleged
sufficient facts to support a claim that Individual Defendants in
the instant case acted in such a way as to “adversely affect[] the
fund,” id., and Individual Defendants therefore fall subject to
liability under 29 U.S.C. § 1392(c).

(See Docket Entry 1, ¶¶ 51-

56.) Other courts recently likewise have followed the reasoning in
Herrmann and/or Illinois Range under similar circumstances.

See

Sun Capital Partners III, LP v. New England Teamsters & Trucking
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Indus. Pension Fund, 903 F. Supp. 2d 107, 120 n.3 (D. Mass. 2012);
Einhorn v. Twentieth Century Refuse Removal Co., No. 11-1451
(JBS/AMD),

2011

WL

6779760,

at

*3-5

(D.N.J.

Dec.

22,

2011)

(unpublished); Operating Eng’rs & Pension Trust Fund v. Western
Power & Equip. Corp., No. C 10-4460 PJH, 2011 WL 2516775, at *3-4
(N.D. Cal. June 23, 2011) (unpublished).
C.

Motion to Strike or Extend Deadline (Docket Entry 66)

After moving to amend their Complaint, Plaintiffs filed the
instant Motion to Strike or Extend Response Deadline (Docket Entry
66) with respect to Defendants’ Motions to Dismiss. They requested
the following:
Since Plaintiffs intend to seek relief under their
proposed amended complaint, Plaintiffs request that their
May 7 deadline to respond to Defendants’ Motions to
Dismiss . . . be stricken, or at least extended pending
a ruling with respect to Plaintiffs’ Motion to Amend
Complaint. Assuming the Court grants Plaintiffs’ Motion
to Amend Complaint, the Defendants’ Motions to Dismiss
will become moot.
(Id.

¶

6.)

Defendants’

Nevertheless,
Motions

to

Plaintiffs

Dismiss

(see

timely

Docket

responded

Entry

68),

to
thus

rendering their request for extension of time moot.
IV.

Conclusion

Plaintiffs’ instant Motion for Leave to Amend Complaint will
be granted as a matter of course or, alternatively, for lack of any
grounds warranting denial of leave.

This action moots Defendant

Cargo Carriers’ Motion to Dismiss and the matching portion of
Individual Defendants’ Motion to Dismiss with respect to the “trade

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or business” issue.

In addition, Individual Defendants’ separate

argument that Count II fails to state a claim lacks merit.
IT IS THEREFORE ORDERED that Plaintiffs’ Motion for Leave to
File Amended Complaint (Docket Entry 65) is GRANTED.

Plaintiffs

shall file an Amended Complaint in substantially the same form as
Exhibit A to their instant Motion for Leave by July 29, 2013.
IT IS FURTHER ORDERED that Plaintiffs’ Motion to Strike
(Docket Entry 66) is DENIED as moot.
IT IS THEREFORE RECOMMENDED that Defendant Cargo Carriers’
Motion to Dismiss (Docket Entry 59) be denied as moot.
IT IS FURTHER RECOMMENDED that Individual Defendants’ Motion
to Dismiss (Docket Entry 61) be denied (in part as moot).

/s/ L. Patrick Auld
L. Patrick Auld
United States Magistrate Judge
July 22, 2013

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