Trustees of International Union of Operating Engineers Local 132 Health and Welfare Fund et al v. Brown's Excavating, Inc. et al
Filing
30
MEMORANDUM OPINION AND ORDER GRANTING THIRD-PARTY DEFENDANT'S MOTION TO DISMISS: Granting 17 Motion to Dismiss; 3rd-Party Complaint is Dismissed Signed by Senior Judge Frederick P. Stamp, Jr on 5/15/15. (soa)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
TRUSTEES OF INTERNATIONAL UNION
OF OPERATING ENGINEERS LOCAL 132
HEALTH AND WELFARE FUND,
TRUSTEES OF INTERNATIONAL UNION
OF OPERATING ENGINEERS LOCAL 132
PENSION FUND,
TRUSTEES OF INTERNATIONAL UNION
OF OPERATING ENGINEERS LOCAL 132
APPRENTICESHIP FUND,
TRUSTEES OF INTERNATIONAL UNION
OF OPERATING ENGINEERS LOCAL 132
ANNUITY AND SAVINGS FUND and
INTERNATIONAL UNION OF OPERATING
ENGINEERS LOCAL 132, AFL-CIO,
Plaintiffs,
v.
Civil Action No. 5:14CV118
(STAMP)
BROWN’S EXCAVATING, INC.
and ERIC K. BROWN,
Defendants,
and
BROWN’S EXCAVATING, INC.,
Third-Party Plaintiff,
v.
INTERNATIONAL UNION OF OPERATING
ENGINEERS LOCAL 18 and
OHIO OPERATING ENGINEERS FRINGE
BENEFITS FUND,
Third-Party Defendants.
MEMORANDUM OPINION AND ORDER
GRANTING THIRD-PARTY DEFENDANT’S MOTION TO DISMISS
I.
Procedural History
The Trustees of International Union of Operating Engineers
Local 132 Health and Welfare Fund, Trustees of International Union
of
Operating
Engineers
Local
132
Pension
Fund,
Trustees
of
International Union of Operating Engineers Local 132 Apprenticeship
Fund, Trustees of International Union of Operating Engineers Local
132 Annuity and Savings Fund, and International Union of Operating
Engineers, Local No. 132, AFL-CIO (“the plaintiffs”) filed a
lawsuit in this Court pursuant to the Labor Management Relations
Act (“LMRA”) and Employee Retirement Income Security Act (“ERISA”).
The plaintiffs allege that they are beneficiaries of collective
bargaining agreements between the defendants, Brown’s Excavating
and its owner, Eric K. Brown, (“the Browns”), and the International
Union of Operating Engineers, West Virginia Local 132 (“Local
132”).
The plaintiffs allege that the Browns failed to submit
contributions to the plaintiffs in a timely manner in breach of the
collective bargaining agreements.
Thereafter, the Browns filed a
third-party complaint against the Ohio Operating Engineers Fringe
Benefit Fund (“Ohio Fund”).
In that complaint the Browns allege
that if they are found liable for the allegations above, that is
only so because of a proper course of dealing between the Ohio
Fund, the plaintiffs, and the Browns wherein the Browns would pay
contributions to the Ohio Fund rather than the plaintiffs depending
on the location of the union with which an employee identified (if
2
the union was in West Virginia, the plaintiffs, if the union was in
Ohio, the Ohio Fund).
The Ohio Fund has filed a motion to dismiss
the third-party complaint.
That motion is fully briefed and ripe
for review.
II.
Facts
In its motion, the Ohio Fund argues that the Browns have
failed to assert that a specific provision of a given contract was
violated
and
thus
pursuant to Iqbal.1
the
third-party
complaint
is
insufficient
Specifically, the Ohio Fund argues that the
Browns do not allege (1) the obligations of the parties, (2) a
breach by the Ohio Fund, (3) that an agreement existed under which
the Ohio Fund would indemnify the Browns in the event of a
delinquent contribution lawsuit brought by the plaintiffs, or (4)
any facts that would entitle the Browns to damages from the Ohio
Fund.
Additionally, the Ohio Fund contends that the Browns are
asserting a course of dealing/course of performance defense which
is prohibited in ERISA delinquent contribution proceedings.
The
Ohio Fund adds that this same defense, brought as a claim in the
1
Ashcroft v. Iqbal, 556 U.S. 662 (2009); Bell Atlantic Corp.
v. Twombly, 550 U.S. 544 (2007). These two cases stand for the
proposition that in order to sustain a motion to dismiss pursuant
to Federal Rule of Civil Procedure 12(b)(6), the complaint must
contain “more than labels and conclusions . . . .” Twombly, 550
U.S. at 555. The Court will refer to these two cases in tandem
throughout this order. However, the Court will not give a full
citation each time.
3
third-party complaint, is an attempt to supersede ERISA through
state law claims and thus it is preempted for that reason as well.
Finally, the Ohio Fund argues that the Browns cannot attempt
to
characterize
contribution.
their
claim
as
one
for
indemnification
or
The Ohio Fund contends that the Browns have failed
to allege any facts showing any contractual obligation on the part
of the Ohio Fund to indemnify the Browns for fringe benefits they
may owe the plaintiffs.
In addition, the Ohio Fund asserts that
the Browns’ claim is not cognizable under ERISA as ERISA does not
support contribution or indemnification claims.
The Browns first indicate that they are a signatory to a
collective bargaining agreement with the Local 132 and Ohio Union
Local 18, which governs matters relating to the plaintiffs and the
Ohio
Fund.
Further,
the
Browns
indicate
that
all
parties,
including the Ohio Fund, have had a course of dealing for at least
twenty years wherein the Browns had made contributions for an
employee’s
fringe
benefits
to
the
local
chapter
of
the
International Union of Operating Engineers (“IUOE”) to which the
employee was a member depending on geographical locale. The Browns
further aver that although the Browns were supposed to make certain
contributions to the plaintiffs, they would forward contributions
attributable to those employees who lived in Ohio to the Ohio Fund.
The Browns argue that now the plaintiffs are asserting that the
Browns are delinquent even though those funds were paid to the Ohio
4
Fund in accordance with the course of dealing between the parties.
Thus, the Browns contend that of the $48,270.08 that should have
been paid to the plaintiffs (over the time complained of in the
plaintiffs’ complaint), $36,843.07 was paid to the Ohio Fund
instead.
Accordingly, the Browns argue that they asserted the
third-party
claims
because
the
funds
that
should
have
been
contributed to the plaintiffs were paid to the Ohio Fund.
Thus, the Browns contend that they have asserted a viable
claim based on a course of dealing and equitable principles.
The
Browns assert that an employer has a right to contribution for
mistakenly paid funds to a trust fund.
Further, the Browns argue
that under Harris Trust and Saving Bank v. Salomon Smith Barney,
Inc., 530 U.S. 238 (2000), they have standing to assert claims for
equitable restitution under § 502(a) of ERISA which the Browns
argue is the basis of their claim in their complaint.
Additionally, the Browns contend that their state law based
claim for contribution and/or indemnification is not preempted as
neither the United States Supreme Court nor the United States Court
of Appeals for the Fourth Circuit have directly addressed the
issue.
split.
The Browns argue that the circuit courts are currently
However,
the
Browns
assert
that
the
courts
finding
non-preemption are correct as they coincide with existing Fourth
Circuit precedent.
5
The Browns contend that their claim of indemnification does
not fall within the three categories of preempted claims identified
by the Fourth Circuit in Coyne & Delany Co. v. Selman, 98 F.3d 1457
(4th Cir. 1996).
In support, the Browns cite cases from district
courts in Ohio and Illinois, Meznarich v. Morgan Waldron Ins.
Management, No.
1:10cv2532, 2012 WL 2367268 (N.D. Ohio June 21,
2012), and Aetna Cas. and Surety Co.
v.
William M.
Mercer, Inc.,
173 F.R.D. 235 (N.D. Ill. 1997), that applied Coyne to find that a
plaintiff’s claims were not preempted by ERISA.
Browns
argue
that
the
case
cited
by
the
Further, the
Ohio
Fund
is
distinguishable as Operating Engineers Local No. 49 Health &
Welfare Fund v. Ronglien Excavating, Inc., No. CIV. 09-65 DWF/RLE,
2009 WL 2568611 (D. Minn. Aug. 18, 2009), is contrary to Coyne.
In reply, the Ohio Fund first argues that this Court should
not consider the exhibit attached to the Browns’ response as it is
evidence outside of the pleadings.
Additionally, the Ohio Fund
contends that the Browns are trying to make a new claim under § 403
or
§
1103
which
was
not
made
in
the
third-party
complaint.
However, the Ohio Fund asserts that even if the claim was correctly
made, it cannot stand because § 403 does not provide an employer
with an implied right of action for the return of contributions
mistakenly paid to trust funds.
The Ohio Fund argues that this
Court should find as such given the United States Court of Appeals
for the Eleventh Circuit’s finding in Dime Coal Co. v. Combs, 796
6
F.2d 394 (11th Cir. 1986), rather than considering the United
States Court of Appeals for the Ninth Circuit’s case cited by the
Browns, Award Service, Inc. v. Northern California Retail Clerks
Unions & Food Employers Joint Pension Fund, 763 F.2d 1066 (9th
Cir.), as Dime Coal correctly considers the legislative intent of
§ 403.
Additionally, the Ohio Fund contends that § 1103 does not
provide relief as the Browns have not pleaded that a demand was
made to the Ohio Fund for the return of the alleged overpayments
within six months of their knowledge of such overpayments or that
if a demand was made, the Ohio Fund arbitrarily and capriciously
refused to repay the mistaken contributions.
Finally, as to § 403
and § 1103, the Ohio Fund argues that the Browns’ claim fails as
they have not pleaded that a mistake has occurred.
As to the Browns’ § 502 claim, the Ohio Fund asserts that the
Browns cannot make such a claim as they are not a participant,
beneficiary, or a fiduciary, and thus lack standing.
Further, the
Ohio Fund argues that the Browns misconstrue Harris Trust as its
concern was identifying the proper defendant in a § 503 ERISA case,
not inventing a new proper plaintiff.
As to the Browns’ arguments
regarding Coyne, the Ohio Fund contends that Coyne
does not
preclude a finding that the state law claim is preempted. The Ohio
Fund asserts that Coyne used the phrase “at least” when discussing
the three preemption categories which leaves those categories open.
Further, the Ohio Fund argues that the Fourth Circuit found that
7
the state law malpractice claim in Coyne was not preempted not
because it was a contribution/indemnification claim but rather
because it did not relate to an employee benefit plan.
Finally,
the Ohio Fund reiterates its argument that the Browns’ course of
dealing/course of performance claim is preempted under ERISA as
they are not cognizable defenses.
III.
Applicable Law
Rule 12(b)(6) of the Federal Rules of Civil Procedure allows
a defendant to raise the defense of “failure to state a claim upon
which
relief
can
be
granted”
as
a
motion
in
response
to
a
plaintiff’s complaint before filing a responsive pleading.
In assessing a motion to dismiss for failure to state a claim
under Rule 12(b)(6), a court must accept the factual allegations
contained in the complaint as true.
Advanced Health-Care Servs.,
Inc. v. Radford Cmty. Hosp., 910 F.2d 139, 143 (4th Cir. 1990).
Dismissal is appropriate only if “‘it appears to be a certainty
that the plaintiff would be entitled to no relief under any state
of facts which could be proven in support of its claim.’”
Id. at
143-44 (quoting Johnson v. Mueller, 415 F.2d 354, 355 (4th Cir.
1969)); see also Rogers v. Jefferson-Pilot Life Ins. Co., 883 F.2d
324, 325 (4th Cir. 1989).
A motion to dismiss for failure to state a claim under Rule
12(b)(6) should be granted only in very limited circumstances, as
the pleading requirements of Federal Rule of Civil Procedure
8
8(a)(2) only mandate “a short and plain statement of a claim
showing that the pleader is entitled to relief.”
Fed. R. Civ. P.
8(a)(2). Still, to survive a motion to dismiss, the complaint must
demonstrate the grounds to entitlement to relief with “more than
labels and conclusions . . . factual allegations must be enough to
raise a right to relief above the speculative level.” Twombly, 550
U.S. at 555; see also Iqbal, 556 U.S. at 663-666.
IV.
Discussion
Initially, this Court notes the Ohio Fund’s argument that the
Browns’ attachment to its response to the motion to dismiss should
not be considered.
However, given this Court’s findings below,
this Court finds that even if it considers the attachments, the
motion to dismiss should still be granted.
Thus, this Court
declines to make a finding regarding that argument.
For the reasons that follow, this Court finds that the thirdparty defendant’s motion to dismiss is granted.
A.
Applicability of § 403
In their response to the motion to dismiss, the Browns argue
that
they
have
an
implied
right
of
action
under
ERISA
§ 403(c)(2)(A)(ii), 29 U.S.C. § 1103(c)(2)(A)(ii), pursuant to
Award Services. The Browns argue that they were mistaken in law or
fact because of the course of dealing that had been established
between the parties.
Further, the Browns argue that neither the
plaintiffs nor the Ohio Fund questioned the contribution until the
9
complaint was filed by the plaintiffs.
Thus, the Browns assert
that they have a legitimate § 403 claim against the Ohio Fund.
The Ohio Fund argues first that the third-party complaint is
devoid of a claim for mistaken contributions under § 403 and thus
the claim should not be considered. Further, the Ohio Fund asserts
that even if the third-party complaint contains such an allegation,
it fails because under § 403, the return of funds is left to the
discretion of the plan administrator and does not prohibit or
require the Ohio Fund to return the funds.
Thus, the Ohio Fund
must first be given an opportunity to determine whether there was
a mistake.
The Ohio Fund also asserts that Award Services is
inapplicable and flawed and that there is not an implied right of
action for the Browns.
Additionally, the Ohio Fund avers that the
Browns have failed to show that they made a § 403 demand on the
Ohio Fund, that a failure to return the contributions was arbitrary
and capricious and inequitable, or that a mistake of fact or law
has occurred because the Browns are still maintaining that their
actions were proper because of the course of dealing.
Section 403 holds, in pertinent part, that:
(2)(A) In the case of a contribution, or a payment of
withdrawal liability under part 1 of subtitle E of
subchapter III of this chapter-(ii) if such contribution or payment is made
by an employer to a multiemployer plan by a
mistake of fact or law (other than a mistake
relating to whether the plan is described in
section 401(a) of Title 26 or the trust which
is part of such plan is exempt from taxation
under section 501(a) of Title 26), paragraph
10
(1) shall not prohibit the return of such
contribution or payment to the employer within
6
months
after
the
plan
administrator
determines that the contribution was made by
such a mistake.
29 U.S.C. § 1103(c)(2)(A)(ii).
Without considering whether or not
§ 403 actually creates an implied right of action,2 this Court
still finds that the Browns’ claim under § 403 fails.
The Fourth
Circuit has held that Congress has provided “the plan administrator
with discretion to determine in the first instance (1) whether a
given contribution was actually the result of a mistake and (2)
whether
a
mistaken
contribution
should
be
returned
to
the
contributing employer.” United States Foodservice, Inc. v. Truck
Drivers & Helpers Local Union, 700 F.3d 743, 748 (4th Cir. 2012)
(citing Chao v.
Malkani, 452 F.3d 290, 297 (4th Cir. 2006)).
Such
a review, when made, is subject to review under an abuse of
discretion standard and should be upheld “unless arbitrary or
capricious, not supported by substantial evidence, or erroneous on
a question of law.”
Id. (citation omitted).
Thus, “the risk of
mistaken contributions should rest largely with the employer.” Id.
2
There is a circuit split as to whether a contributing
employer has an implied right of action under § 403.
Award
Services, 763 F.2d at 1068-69 (finding that there is an implied
right of action for a contributing employer under § 403); contra
Dime Coal, 796 F.2d at 400 (finding no implied right of action);
Whitworth Bros. Storage Co. v. Cent. States, Se. & Sw. Areas
Pension Fund, 794 F.2d 221, 233 (6th Cir. 1986)(same as Dime Coal);
Crown Cork & Seal Co. v. Teamsters Pension Fund of Philadelphia &
Vicinity, 720 F.2d 661 (3d Cir. 1983)(same as Dime Coal). However,
this Court may decide this issue without answering such a question.
11
(internal
quotation
omitted).
As
such,
it
is
for
the
plan
administrator, not this Court, to determine whether a contribution
was made by mistake and, “if so, whether it should be returned to
the contributing employer.”
Id.
In this case, the Browns have not alleged in their complaint
that they have fulfilled the initial requirements of § 403 as set
out in United States Foodservice. The Browns have not alleged that
they provided the Ohio Fund with the opportunity to consider
whether the contributions the Browns made to it were made by
mistake of fact or law.
See Trustees of the Operating Engineers
Health and Welfare Trust Fund for Northern California, et al. v.
Precision Crane Services Inc., No. C07-05323, 2008 WL 1817297, at
*2-3 (N.D. Cal. Apr. 22, 2008) (adopting Award Services but finding
that contributing employer must first request that multi-employer
plan determine whether a mistake has been made).
Further, the
Browns have not alleged that in addition to such a request being
made to the Ohio Fund, that the Ohio Fund refused to return the
contributions
arbitrarily,
capriciously,
substantial evidence, or erroneously.
700 F.3d at 748.
without
support
of
United States Foodservice,
As such, the third-party complaint fails to make
a claim upon which relief can be granted even if this Court were to
find that the Browns had an implied right of action under § 403.
The factual allegations contained in the third-party complaint are
not “enough to raise a right to relief [under § 403] above the
12
speculative level.”
Twombly, 550 U.S. at 555; see also Iqbal, 556
U.S. at 663-666.
B.
Equitable Restitution under ERISA § 502
The Browns argue that they have made a cognizable claim for
equitable restitution pursuant to ERISA § 502(a)(3).
§ 1132(a).
29 U.S.C.
The Browns note that Harris Trust described what
entities are proper defendants under a § 502 claim and that
fiduciaries of an ERISA plan have standing.
Thus, the Browns
assert that they may bring their claims under this section as the
Ohio Fund was a knowing participant in the Browns’ contribution
practices and thus is a proper defendant.
The Ohio Fund asserts that the Browns may not assert a claim
under § 502(a)(3) because the Browns are an employer and not “a
participant, beneficiary, or fiduciary” of the plan. The Ohio Fund
argues that the Browns misconstrue Harris Trust in that Harris
Trust dealt with what a proper defendant is, not what a proper
plaintiff is under this section.
Section 502(a)(3) authorizes a “participant, beneficiary, or
fiduciary” of a plan to bring a civil action to obtain “appropriate
equitable relief” to redress violations of ERISA Title I.
Trust, 530 U.S. at 241.
Harris
The Supreme Court has held that this
section may be used to bring an action against a nonfiduciary
“party
in
§ 406(a).
interest”
who
engaged
in
a
transaction
barred
by
Id. (§ 406(a) lists certain actions that may not be
13
undertaken in regard to an ERISA plan).
However, the question in
this case is whether the Browns are proper plaintiffs and may bring
such an action against the Ohio Fund.
Thus, because Harris Trust
dealt with the question of what entities may be proper defendants,
this Court must focus elsewhere.
In order to be proper plaintiffs, the Browns must be either a
“participant, beneficiary, or fiduciary” of the plan at issue. Id.
The Browns are clearly not a participant or beneficiary of the plan
at issue and thus must fall under the definition of a fiduciary.
Section 3(21)(A) of ERISA defines a person as a fiduciary of
an ERISA plan to the extent that he:
(i)
[E]xercises
any
discretionary
authority
or
discretionary control respecting management of such plan
or exercises any authority or control respecting
management or disposition of its assets, (ii) he renders
investment advice for a fee or other compensation, direct
or indirect, with respect to any moneys or other property
of such plan, or has any authority or responsibility to
do so, or (iii) he has any discretionary authority or
discretionary responsibility in the administration of
such plan.
29 U.S.C. § 1002(21)(A).
A party’s “status as [an] employer[ ],
standing alone, is not enough to confer fiduciary status.”
Id.
(citing Siskind v. Sperry Retirement Program, 47 F.3d 498, 505 (2d
Cir. 1995) (“An employer acts as a fiduciary within the meaning of
ERISA
.
.
.
only
when
fulfilling
certain
defined
functions
. . . .”); Barnes v. Lacy, 927 F.2d 539, 544 (11th Cir. 1991)
(“Generally,
employers
owe
no
fiduciary
duty
toward
plan
beneficiaries under the ERISA.”); Gelardi v. Pertec Computer Corp.,
14
761 F.2d 1323, 1325 (9th Cir. 1985) (“Once [employer] appointed the
Plan Administrator and gave him control over the Plan, [employer]
was no longer a fiduciary because it retained no discretionary
control over the disposition of claims.”)).
As such, in order for
a plaintiff to have standing as a fiduciary it “must point to
something about the [employer’s] relationship to the Fund[ ] that
indicates authority or control over the management or disposition
of a plan asset.”
In re Luna, 406 F.3d 1192, 1205 (10th Cir.
2005).
The third-party complaint is devoid of any indication as to
why the Browns should be considered a fiduciary other than the fact
that the Browns are a contributing employer.
See contra Coyne, 98
F.3d at 1465 (finding an employer was a fiduciary where the
employer had the additional responsibility of monitoring the plan
administrator and supervisor and the ability to remove the plan
administrator and supervisor).
Further, the Browns do not address
why they are proper plaintiffs in their briefing of the motion to
dismiss.
Rather, the Browns focus on why the Ohio Fund is a proper
defendant under § 502(a)(3). Thus, the third-party complaint fails
to provide any factual allegations that would lead this Court to
find that the Browns believe they are a fiduciary and thus may be
proper plaintiffs under § 502(a)(3).
Further, the Court notes that the Tenth Circuit and Ninth
Circuit have split on the question as to whether simply breaching
15
an agreement to pay contributions to a plan is enough to make an
employer a fiduciary.
The United States Court of Appeals for the
Tenth Circuit has found that an employer is not a fiduciary simply
because
it
breaches
contributions.
its
contractual
obligations
to
make
In re Luna, 406 F.3d at 1202; contra N. California
Retail Clerks Unions & Food Employers Joint Pension Trust Fund v.
Jumbo Markets, Inc., 906 F.2d 1371, 1372 (9th Cir. 1990) (holding
the opposite).
However, the Browns have only stated in their
third-party complaint that they had duties to pay contributions and
that the Browns have properly paid such contributions according to
a course of dealing between the parties.
As such, the third-party
complaint does not concede that the Browns have breached their
agreement.
Thus, even if this Court were to find the Ninth
Circuit’s finding more persuasive, which this Court does not, the
Browns would still not qualify as a fiduciary.
Accordingly, the Browns have failed to state a claim under
§ 502(a)(3) upon which relief may be granted.
C.
Course of Dealing/Course of Performance Defense under ERISA
The Ohio Fund argues that the Browns’ course of dealing/course
of performance claim is not a cognizable defense under ERISA § 515.
Further, the Ohio Fund asserts that because the Browns did not
address this argument in their response to the motion to dismiss
that the Browns have conceded that the course of dealing/course of
performance claim is not a cognizable defense and is preempted.
16
ERISA § 515, 29 U.S.C. § 1145, is the product of Congress’s
need “to eliminate many contract defenses involving formation and
course of performance that significantly complicated pension fund
collection cases.”
Cement Masons’ Pension Fund, Local 502 v.
Dukane Precast, Inc., 822 F. Supp. 1316, 1320 (1993) (citing
Central States, Southeast and Southwest Areas Pension Fund v.
Gerber Truck Service, Inc., 870 F.2d 1148, 1152-56 (7th Cir.
1989)).
ERISA § 515 “prevents a court from giving force to oral
understandings between union and employer that contradict the
writings.”
Gerber, 870 F.2d at 1153.
This is because “[d]efenses
based on . . . [an] oral side agreement [or] course of performance
. . . [are] defenses most likely to breed litigation even when
asserted in good faith, and they create manifold opportunities for
manipulation . . . .”
Id. at 1154.
Accordingly, a course of
performance defense has “uniformly been disallowed.” Massachusetts
Laborers’ Health & Welfare Fund v. Explosives Eng’g, Inc., 136
F.R.D. 24, 26-27 (D. Mass. 1991).3
3
Only two defenses along this
The United States District Court for the District of
Massachusetts cited several cases supporting this proposition.
Bituminous Coal Operators’ Association, Inc. v. Connors, 867 F.2d
625, 634 (D.C. Cir. 1989) (“employer may not defend on the ground
of union misconduct in negotiating the agreement”); Robbins v.
Lynch, 836 F.2d 330, 334 (7th Cir. 1988) (“A claim that the union
has promised not to collect a payment called for by the agreement
is not a good answer to the trustees’ suit.”); Trustees of Laborers
Local Union 800 v. Pump House, Inc., 821 F.2d 566, 568 (11th Cir.
1987) (“the defense of fraud in the inducement is unavailable as a
defense to an action by employee benefit fund trustees to collect
delinquent contributions”); Operating Engineers Pension Trust v.
Cecil Backhoe Service, Inc., 795 F.2d 1501, 1507 (9th Cir. 1986)
17
line of argument have been recognized: “(1) that the pension
contributions themselves are illegal, and (2) that the collective
bargaining agreement is void (not merely voidable).”
Benson v.
Brower’s Moving and Storage, Inc., 907 F.2d 310, 314 (2d Cir. 1990)
(internal citations omitted).
In this case, the Browns have claimed that a course of dealing
was established between the parties and thus their contributions
were made properly according to that course of dealing.
Further,
the Browns allege that because of this course of dealing, the Ohio
Fund is culpable as it participated in the scheme along with the
Browns and the plaintiffs.
However, given the above, this Court cannot find that the
Browns have made a proper claim in relying on its course of dealing
argument.
Such a contract defense has not been recognized as a
cognizable ERISA defense.
Further, the Browns have not made a
claim in the third-party complaint under the two defenses that have
been
recognized.
The
Browns
have
not
claimed
that
their
contributions to the Ohio Fund were illegal nor have they claimed
that
the
collective
bargaining
agreement
is
void.
Id.
Accordingly, the Browns have failed to assert a claim in their
(“trust funds cannot, therefore, be estopped based on alleged
actions or acquiescence of the union or its agents”); Southwest
Administrators, Inc. v. Rozay’s Transfer, 791 F.2d 769, 775 (9th
Cir. 1986), cert. denied, 479 U.S. 1065 (1987) (“The claim that a
promise to make contributions was fraudulently induced is not a
legitimate defense.”).
18
third-party complaint upon which relief may be granted by this
Court.
D.
State-Law Claim Under ERISA: Indemnification and Contribution
The Browns argue that according to the Fourth Circuit’s
holding in Coyne, their contribution and indemnification claims are
not preempted under ERISA as those claims do not fall within the
three categories of preempted state-law claims.
The Ohio Fund
asserts that Coyne’s finding was not all-inclusive and that other
state-law claims, other than the three specifically listed, are
preempted under ERISA.
Further, the Ohio Fund contends that even
if the claims are not preempted, the third-party complaint fails to
assert facts showing that a contract or other obligation required
the Ohio Fund to indemnify the Browns for money they owed the
plaintiffs.
ERISA preempts all state law claims that “relate to any
employee benefit plan.”
29 U.S.C. § 1144(a); ERISA § 514.
A state
law relates to a benefit plan “even if the law is not specifically
designed to affect such plans, or the effect is only indirect.”
Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 139 (1990) (citation
omitted). The policy underlying ERISA preemption is that state law
claims should not proceed if they “threaten[ ] ERISA’s objectives
of ‘protect[ing] . . . the interests of participants in employee
benefit plans and their beneficiaries, . . . by establishing
standards
of
conduct,
responsibility,
19
and
obligation
for
fiduciaries . . . and . . . by providing for appropriate remedies,
sanctions, and ready access to the Federal courts.’
§ 1001(b).”
Coyne, 98 F.3d at 1470.
29 U.S.C.
Given these objectives,
the Supreme Court has explained that Congress intended to
preempt at least three categories of state law under
§ 514: (1) laws that mandate employee benefit structures
or their administration, (2) laws that bind employers or
plan administrators to particular choices or preclude
uniform administrative practices, and (3) laws that
provide alternative enforcement mechanisms to ERISA’s
civil enforcement provisions.
Travelers, 514 U.S. at
658-59, 115 S. Ct. 1671; see also Coyne & Delany, 98 F.3d
at 1468. These three preemption categories are thus a
guide for determining whether a particular state law
relates to an ERISA plan.
Darcangelo v. Verizon Commc’ns, Inc., 292 F.3d 181, 190 (4th Cir.
2002).
The immediately preceding passage is relied upon by the
Browns
for
their
argument
that
their
indemnification
and
contribution claims are not preempted.
The Ohio Fund, as a party seeking to use ERISA preemption as
an affirmative defense to the Brown’s state law claims, has the
burden to prove the facts necessary to establish ERISA preemption.
Great-West Life & Annuity Ins. Co. v. Information Systems &
Networks Corp., 523 F.3d 266, 270 (4th Cir. 2008).
The Browns cite two district court cases to support their
argument that Coyne has limited preempted state law claims to the
three categories cited above. However, this Court first notes that
the Coyne court uses the term “at least” in describing the three
categories.
Coyne, 98 F.3d at 1468.
Further, in a case that
followed Coyne, the Fourth Circuit noted that those categories act
20
as “a guide.”
Darcangelo, 292 F.3d at 190.
Accordingly, this
Court cannot find that the language used by the Fourth Circuit in
Coyne and Darcangelo was all inclusive.
This Court also finds that Meznarich and Aetna, the cases
cited by the Browns, do not support a finding that the categories
are all inclusive or that all indemnification and contribution
claims are preempted.
In Meznarich, the Court noted that the
indemnification and contribution claims could not be preempted
“wherein the plaintiffs sought contribution or indemnification for
conduct that was shown to be unrelated to the Plan” because the
complained of conduct related to things that had occurred prior to
the Plan’s formation and was “independent of the Plan.” at *5-8.
The Meznarich court itself, while citing the three categories from
Coyne,
also
traditional
cited
ERISA
that
plan
the
claims
entities.”
raised
“implicate[
Id.
7.
at
]
the
Plainly,
the
Meznarich court appears to have taken a case-by-case approach
determining whether or not the indemnification or contribution
claims were preempted based on the relationships of the parties and
when the complained of acts took place prior to a plan being
instituted or after its institution.
This is true in the Aetna
case from the Northern District of Illinois as well, wherein that
court found that “ERISA does sometimes preempt claims for which the
statute itself provides no remedy . . . [b]ut those situations,
21
unlike the current one, closely implicate ERISA relationships.”
Aetna, 173 F.R.D. at 239.
This case is more closely related to the United States
District Court for the District of Minnesota’s case, Ronglien,
wherein the court found that an employer’s state-law claims were
preempted because the claims would impact a term of the collective
bargaining agreement. Ronglien, at *5. The plaintiff in that case
had claimed that because of a course of dealing between the
parties, terms of the collective bargaining agreement had been
impacted.
Id.
This claim, because of its possible impact on the
collective bargaining agreement, was found to be preempted.
Id.
The Browns have made similar arguments in this case and this
Court has found in this order that the Browns’ course of dealing
argument fails.
As the course of dealing argument fails, the
Browns therefore would also not be able to seek condemnation or
indemnification based on such an argument.
Moreover, the relationship of the Browns to the Ohio Fund
implicates the collective bargaining agreement and what the terms
of that agreement are and were at the time of the alleged misplaced
contributions.
The Browns have only argued that because of a
course of dealing, the plaintiffs and the Ohio Fund had agreed to
different terms then those previously agreed upon.
Thus, because
of the relationship between the Browns and the other parties, this
22
Court must find that the Browns’ indemnification and contribution
claims are preempted in this action.
This Court also notes that it is not alone in finding claims
for indemnification and contribution by a non-fiduciary against a
fiduciary preempted.
Guar.
Ass’n v.
North Carolina Life and Acc. and Health Ins.
Alcatel, et al., 876 F. Supp. 748, (E.D. N.C.
1995) (finding that ERISA created “neither an express nor an
implied right to indemnification between a plan fiduciary and a
non-fiduciary and . . . doubts that any claim for indemnification
or contribution should be read into ERISA”); see also Travelers
Cas. and Sur. Co. of America v. IADA Services, Inc., 497 F.3d 862,
864-868 (8th Cir. 2007) (finding that state common-law claims of
indemnification and contribution were preempted as ERISA has a
strong presumption against creating additional remedies); Kim v.
Fujikawa, 871 F.2d 1427, 1432-33 (9th Cir. 1989) (finding that
contribution was not an accessible remedy and was preempted as a
claim for a breaching fiduciary); NARDA, Inc. v. Rhode Island Hosp.
Trust Nat. Bank, 744 F. Supp. 685, 697 (D. Md. 1990) (“It thus
appears that the failure to include the rights of contribution and
indemnity in ERISA was intended by Congress and the omission of
those rights is not an unaddressed detail or gap to be filled by
a federal common law.”); Fedex Corp. v. Northern Trust Co., No.
08-2827, 2010 WL 2836345, at *3-4 (W.D. Tenn. July 16, 2010)
23
(finding that one co-fiduciary may not bring a contribution claim
against another co-fiduciary as such claims are preempted).
As such, there are no claims in the Browns’ third-party
complaint upon which relief may be granted and this Court must
grant the third-party defendant’s motion to dismiss.
V.
Conclusion
Based on the analysis above, this Court finds that the thirdparty defendant’s motion to dismiss is GRANTED.
Accordingly, the
third-party complaint is DISMISSED.
IT IS SO ORDERED.
The Clerk is DIRECTED to transmit a copy of this memorandum
opinion and order to counsel of record herein.
DATED:
May 15, 2015
/s/ Frederick P. Stamp, Jr.
FREDERICK P. STAMP, JR.
UNITED STATES DISTRICT JUDGE
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