Opinion
No. C02-0139.
July 2, 2003.
ORDER
This matter comes before the court pursuant to the defendant's May 16, 2003 motion to dismiss (docket number 44). The parties have consented to the exercise of jurisdiction by a United States Magistrate Judge pursuant to 28 U.S.C. § 636(c). For the reasons set forth below, the motion is granted in part and denied in part.
In this case, the plaintiffs allege that the defendant, Central States, Southeast and Southwest Areas Pension Fund, wrongfully expelled CRST from its pension fund. The plaintiffs are seeking a declaratory judgment that CRST was wrongfully expelled from the fund and is entitled to return as a fund participant. Central States moves to dismiss, arguing: (1) there is no subject matter jurisdiction under 29 U.S.C. § 1451; (2) Counts I, II, IV and V of the first amended complaint fail to state a claim upon which relief can be granted under the Employee Retirement Income Security Act (ERISA); (3) Counts I, II, IV and V are preempted by ERISA; and (4) Count III fails to state a cause of action because 29 U.S.C. § 1140 does not apply to decisions made by a plan.
Factual Background
CRST is an interstate motor carrier engaged in short and long haul transportation. As a union employer, CRST maintains two collective bargaining agreements with the International Brotherhood of Teamsters. Pursuant to the collective bargaining agreements with Teamsters Local 142 and Teamsters Local 238, as well as its participation agreements with the unions, CRST made monthly contributions to Central States on behalf of its union employees. Consistent with Teamsters Local 142's collective bargaining agreement, CRST employs five employees, a decreased number from the 17 employees in 1999. CRST and Teamsters Local 142 signed an agreement maintaining all terms, working conditions and payments, including pension contributions to Central States, until either an impasse in negotiations is reached or a new collective bargaining agreement is agreed upon and signed. Teamster's Local 238's collective bargaining agreement covers CRST's two mechanics working out of CRST's facilities leased to another company, Hawkeye, Inc. At this facility, Hawkeye, Inc. employs mechanics that work side-by-side with CRST's mechanics.
On August 21, 2002, Central States' Board of Trustees' decided to expel CRST from its pension fund, effective September 29, 2002. Central States asserts that CRST violated Special Bulletin 90-7 and therefore violated the fund's policy of adverse selection. Special Bulletin 90-7 prohibits an employer from engaging in arrangements that encourage adverse selection that impact the actuarial soundness of the fund. In other words, it prohibits an employer from entering into a collective bargaining agreement in which only some employees participate in the pension fund. After CRST was expelled from the fund, it paid the amount of withdrawal liability assessed by Central States and stopped making contributions to the fund.
Conclusions of Law Subject-Matter Jurisdiction
In their complaint, the plaintiffs assert jurisdiction under 29 U.S.C. § 1451. That section provides:
A plan fiduciary, employer, plan participant, or beneficiary, who is adversely affected by the act or omission of any party under this subtitle with respect to a multiemployer plan, or an employee organization which represents such a plan participant or beneficiary for purposes of collective bargaining, may bring an action for appropriate legal or equitable relief, or both.29 U.S.C. § 1451(a)(1). Central States argues that there is no subject-matter jurisdiction under § 1451 because the expulsion of an employer from a plan does not fall under subtitle E, which is the subtitle referenced in § 1451, and subtitle E only deals with withdrawal liability. In fact, Central States points out that no section of ERISA regulates the expulsion of an employer from a pension plan. Therefore, because all of the plaintiffs' claims arise from the expulsion of CRST from the fund, Central States argues there is no jurisdiction under § 1451. The plaintiffs argue that jurisdiction is proper under § 1451 because subtitle E covers 29 U.S.C. § 1381-1453, including § 1383 which addresses complete withdrawal from a plan. 29 U.S.C. § 1383 provides:
[A] complete withdrawal from a multiemployer plan occurs when an employer —
(1) permanently ceases to have an obligation to contribute under the plan, or
(2) permanently ceases all covered operations under the plan.29 U.S.C. § 1383(a). The issue remains whether the expulsion of an employer from a plan constitutes a "complete withdrawal." Although ERISA does not explicitly address the expulsion of an employer from a plan, its definition of a "complete withdrawal" from a plan is useful in making this assessment.
After CRST was expelled from Central States, it stopped making contributions to the fund and it also paid Central States' assessment of withdrawal liability without dispute in the amount of $358,534.84. CRST has no further obligation to contribute to Central States. An expulsion of an employer should therefore qualify as a "complete withdrawal" from a plan. See Cent. States, Southeast and Southwest Areas Pension Fund v. Jones Motor Corp., Inc., 1999 WL 521163, *2 (N.D. Ill. July 13, 1999) (finding Central States' decision to expel the employer from participation in the pension fund constitutes a complete withdrawal unless the employer offers some evidence that is still required to continue making contributions after its expulsion); see also Robbins v. The Kohn Beverage Co., 1985 WL 955, *4 (N.D. Ill. Apr. 29, 1985) (stating "where Congress has declined to except expulsion from the definition of withdrawal, this court will not create such an exception."). Because a complete withdrawal is covered under § 1383 and § 1383 falls within subtitle E under § 1451, and because the plaintiffs argue they have been adversely affected by the expulsion, the plaintiffs may bring an action for relief under § 1451. Therefore, there is subject matter jurisdiction in this case. Further, the plaintiffs motion to amend their complaint to include 29 U.S.C. § 1132(e) and 28 U.S.C. § 1331 as two additional bases of jurisdiction is granted.
It should be pointed out that the Eighth Circuit Court of Appeals has held that a decision made by trustees to refuse payments submitted by an employer in order to protect the fund is subject to the "arbitrary, capricious, or an abuse of discretion" standard. Cent. Hardware Co. v. Cent. States, Southeast and Southwest Areas Pension Fund, 770 F.2d 106, 110 (8th Cir. 1985). By addressing what standard a decision to expel is subject to, the court assumed jurisdiction but never cited the source of its jurisdiction. This court finds that there is jurisdiction under 29 U.S.C. § 1451.
Central States further argues that to the extent the plaintiffs challenge the assessment of withdrawal liability to CRST, this claim is subject to mandatory arbitration pursuant to 29 U.S.C. § 1401(a)(1). In the plaintiffs' first amended complaint, they seek reimbursement "for the full amount of withdrawal liability already paid." The plaintiffs contend that § 1401(a)(1) is not applicable because they are only contesting CRST's expulsion from the fund and not the assessment of withdrawal liability. Section 1401(a)(1) only mandates arbitration for actions regarding withdrawal liability assessment. Section 1401 is not applicable here because the plaintiffs are not challenging the assessment of withdrawal liability, rather, they are seeking reimbursement only if CRST's expulsion from the plan is found to be improper. CRST paid the amount assessed by Central States without any dispute and the plaintiffs specifically state they are not disputing Central States' assessment of withdrawal liability. The plaintiffs are only seeking a declaratory judgment that CRST's expulsion from the plan was wrongful and if it is found to have been wrongful, they seek reimbursement of the withdrawal liability already paid. Therefore, the plaintiffs' claims are not subject to the mandatory arbitration provision provided for in § 1401.
Failure to State a Claim Under ERISA
Central States asserts that Counts I, II, IV and V of the plaintiffs' complaint fail to state a claim under ERISA. Count I of the complaint alleges: "Declaratory Judgment under 28 U.S.C. § 2201 that Central States Lacks the Grounds in Which to Expel CRST from the Fund." Count II alleges: "Tortious Interference with a Contract." Count IV alleges: "Breach of Contract" and Count V alleges: "Disparate Treatment."
Central States argues that ERISA is intended to protect participants and beneficiaries of plans and CRST is seeking to have its interests trump the interest of Central States in preserving its assets to provide benefits, and federal common law cannot be used to upset Congress' policy choices. Central States further asserts that ERISA does not provide a cause of action to challenge an expulsion or alteration or termination of a plan. Central States concedes that the individual plaintiffs are entitled to accrued benefits but argues they are not entitled to any owed benefits. The plaintiffs assert they have stated valid claims and that a cause of action exists under 29 U.S.C. § 1451. The plaintiffs argue that federal courts have the authority to develop federal common law.
The court will first address Central States' argument that the plaintiffs failed to state a claim in Count I. Central States is correct in pointing out that ERISA does not provide a cause of action to challenge an alteration or termination of a plan and that "`[e]mployers or other plan sponsors are generally free under ERISA, for any reason at any time, to adopt, modify, or terminate welfare plans.'" Lockheed Corp. v. Spink, 517 U.S. 882, 890 (1996) (citing Curtiss-Wright Corp. v. Schoonejongen, 514 U.S. 73, 78 (1995)). However, in this case, a plan is not being terminated or modified. Rather, Central States has expelled only one employer, CRST, from its plan. While it is true that ERISA does not specifically deal with an employer's expulsion from a plan, it does not necessarily follow that no cause of action exists allowing an employer to challenge that expulsion. Section 1451 states that an employer has a cause of action against a plan, providing that employer was adversely affected by an act or omission under subtitle E. This language is broad enough to encompass an action such as this one challenging an expulsion from a pension plan. Both CRST and the individual plaintiffs have been arguably adversely affected by no longer being allowed to participate in the fund. The plaintiffs have therefore stated a cause of action in Count I.
ERISA Preemption
Central States argues that Counts I, II, IV and V of the complaint are preempted by ERISA. The plaintiffs argue that these claims are not preempted and that under contract law, the court is allowed to interpret ERISA using state common law where CRST's contract claims are in no way contrary to ERISA.
"ERISA is a comprehensive statute designed to promote the interests of employees and their beneficiaries in employee benefit plans." Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 90 (1983) (citations omitted). The Supreme Court stated that in enacting ERISA, Congress intended "`to establish pension plan regulation as exclusively a federal concern.'" FMC Corp. v. Holliday, 498 U.S. 52 (1990) (quotation omitted). 29 U.S.C. § 1144(a) provides that ERISA "shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan. . . ." 29 U.S.C. § 1144(a). The plaintiffs' state law claims are preempted if the claims "relate to" an employee benefit plan. Id. A claim relates to an employee benefit plan covered by ERISA if it "(1) has a connection with or (2) reference to such a plan." Cal. Div. of Labor Standards Enforcement v. Dillingham Constr., N.A., Inc., 519 U.S. 316, 324 (1997) (citations omitted). Statutory mandates, court decisions, and state law from all other sources are included in ERISA's preemption clause. Kuhl v. Lincoln Nat. Health Plan of Kansas City, Inc., 999 F.2d 298, 301 (8th Cir. 1993) (en banc) (holding tortious interference, medical malpractice, and breach of contract are all preempted by ERISA).
It is clear that the plaintiffs' claims raised in Counts II, IV and V arise from the expulsion of CRST from Central States. The pension plan at issue is a plan governed by ERISA. Reducing the plaintiff's complaint to its core — that Central States should not have expelled CRST from the plan — demonstrates the causes of action for breach of contract, tortious interference with contract, and disparate treatment are preempted. The plaintiffs' claims "relate to" an employee benefit plan, therefore, the causes of action in Counts II, IV and V are preempted by ERISA. See 29 U.S.C. § 1144(a).
Cause of Action Against "Plan"
Finally, Central States moves to dismiss Count III of the complaint. Count III alleges: "Violation of Section 510 of ERISA, 29 U.S.C. § 1140." That section provides:
It shall be unlawful for any person to discharge, fine, suspend, expel, discipline, or discriminate against a participant or beneficiary for exercising any right to which he is entitled . . . or for the purpose of interfering with the attainment of any right to which such participant may become entitled. . . .29 U.S.C. § 1140. Central States argues that Count III fails to state a cause of action because 29 U.S.C. § 1140 does not apply to decisions made by a plan. The plaintiffs argue that § 1140 does apply to decisions made by Central States because a "person" includes individuals, corporations, and fiduciaries.
Section 1140 specifically prohibits "persons" from discriminating against participants or beneficiaries. There has been some disagreement among courts whether "person" as used in § 1140 may include defendants beyond employers. A majority of circuits have adopted the view that the employer-employee relationship is the only one covered under § 1140. See Straus v. Prudential Employee Sav. Plan, 253 F. Supp.2d 438, 447 (E.D.N.Y. 2003) (citations omitted). The Seventh Circuit has interpreted § 1140 to apply only in instances in which an employer wrongfully alters the employment relationship to prevent benefit rights from vesting. White v. Sundstrand Corp., 2000 WL 713739, *14 (N.D. Ill. 2000); see also Deeming v. Am. Standard, Inc., 905 F.2d 1124, 1127 (7th Cir. 1990) (stating "[i]t is clear from the text of the statute . . . that § [1140] was designed to protect the employment relationship against actions designed to interfere with, or discriminate against, the attainment of a pension right. . . . This means that a fundamental prerequisite to a § [1140] action is an allegation that the employer-employee relationship, and not merely the pension plan, was changed in some discriminatory or wrongful way."). The Third Circuit found that Congress enacted § 1140 "to prevent `unscrupulous employers from discharging or harassing their employees in order to keep them from obtaining vested pension rights.'" Gavalik v. Cont'l Can Co., 812 F.2d 834, 851 (3d Cir. 1987) (citations omitted).
The plaintiffs have presented some cases in which courts found that § 1140 includes defendants beyond employers. The Fourth Circuit held that "[i]n light of the plain language of the section, we cannot agree . . . that Congress intended to limit those who could violate § 1140 to employers." Custer v. Pan Am. Life Ins. Co., 12 F.3d 410, 421 (4th Cir. 1993) (citation omitted). The court found that in light of ERISA's definition of "person," potential defendants could also include a corporation, mutual company, or association. Id. (citing 29 U.S.C. § 1002(9)). Therefore, in that case, the court allowed suit to be brought under § 1140 against the plan administrator and the underwriter of the employer-provided group health and life policy. Id. The Ninth Circuit has also held that "the section refers to `any person,' not just to an employer." Tingey v. Pixley-Richards West, Inc., 953 F.2d 1124, 1132 n. 4 (9th Cir. 1992) The court concluded that "[w]e believe that an insurer who coerces an employer to fire an employee must be covered by this language." Id.
This court finds that Congress did not intend plans to be included under § 1140. ERISA expressly defines the term "person" as "an individual, partnership, joint venture, corporation, mutual company, joint-stock company, trust, estate, unincorporated organization, association, or employee organization." 29 U.S.C. § 1002(9). "Pension plans are conspicuously absent from this list." Swanson v. U.A. Local 13 Pension Plan, 779 F. Supp. 690, 702 (W.D.N.Y. 1991). The plaintiffs have not presented any cases allowing the plan itself as a defendant. The cases cited by the plaintiffs allowed suits under § 1140 against the plan administrator or the insurer, but not against the plan itself.
This court agrees with the reasoning applied in Adams v. Koppers Co., Inc., in which the court found after reviewing the statutory text, the legislative history, and the case law, that all point to the conclusion that a plan is not a proper defendant under 29 U.S.C. § 1140. Adams v. Koppers Co., Inc., 684 F. Supp. 399, 401 (W.D. Pa. 1988). The court in Adams also considered the lack of any reported cases involving a § 1140 action against a plan to be significant. Id.
The language of the statute lists a large variety of defendants and does not list plans. The legislative history indicates that § 1140 was directed at employment decisions, which would not normally be under the control of the plan. We find no indication that the exclusion of plans from the definition of "person" in § 1002(9) was unintentional.
Id. Central States' Motion to Dismiss is granted with respect to 29 U.S.C. § 1140.
However, the plaintiffs may have a potential action against the plan administrators, who fit the definition of "person" under § 1002(9). See id. "Although unusual, in some circumstances, a plan administrator may have sufficient involvement in employment decisions to incur liability under § 1140." Id. Such a case would be rare because few plan administrators have authority to discharge employees or take any other of the actions proscribed by § 1140. Id. The plaintiffs motion to amend their complaint to include the plan administrators as defendants is therefore granted.
Upon the foregoing,
IT IS ORDERED.
1. Counts II, III, IV and V are dismissed.
2. The plaintiffs' motion to amend the first amended complaint (docket number 48) is granted.