Opinion
3:10-cv-526-RCJ-RAM.
July 5, 2011
ORDER
Currently before the Court is Defendants' Motion to Dismiss (#21) Plaintiff Diversified Concrete Cutting, Inc.'s ("Plaintiff") complaint. The Court heard oral argument on June 6, 2011.
BACKGROUND
The following facts are taken from the First Amended Complaint (#11).
Plaintiff is a licensed contractor and is a signatory to several labor agreements, including a multi-employer collective bargaining agreement with Operating Engineers Local No. 3 and a multi-employer collective bargaining agreement with Operating Engineers Local No. 12. (First Am. Compl. (#11) at 2).
In summary, this lawsuit is based on Plaintiff's assertion that it erroneously paid contributions to the trust funds benefitting Local No. 3 which should have been made to the trust funds for Local No. 12. Plaintiff is now seeking reimbursement for those erroneously paid funds.
The trust fund entities involved in this action are the Trustees of the Operating Engineers Pension Trust Fund, the Trustees of Operating Engineers and Participating Employers Preapprentice, Apprentice, and Journeyman Affirmative Action Training Fund for Northern Nevada, the Trustees of the Northern Nevada Operating Engineers Health and Welfare Trust Fund, the Trustees of the Operating Engineers Vacation and Holiday Pay Plan, and the Trustees of the Operating Engineers Pensioned Operating Engineers Health and Welfare Trust Fund (collectively referred to herein as the "Trust Funds"). Id. at 3. Plaintiff asserts that the Trust Funds are express trusts created in accordance with written declarations of trust between Local No. 3 and various employer associations in the construction industry. Id. In addition, Plaintiff states that the Trust Funds were created and now exist pursuant to section 301(a) of the Labor Management Relations Act, as amended, 29 U.S.C. § 185(a), and are "employee benefit plans" within the meaning of section 3(37) of ERISA, 29 U.S.C. § 1002(37). Plaintiff states that the Trust Funds are proper parties in this action because they are charged with determining the payment of benefits and authorizing the return of contributions which were made to the Trust Funds as a result of mistake of fact or law, in accordance with 29 U.S.C. § 1103(c)(2)(A). Id.
Plaintiff alleges that John Madole and Russell Burns are Trustees, and are the Chairman and Co-Chairman of the Board of Trustees, of the Northern Nevada Operating Engineers Health and Welfare Trust Fund and the Operating Engineers and Participating Employers Preapprentice, Apprentice, and Journeyman Affirmative Action Training Fund for Northern Nevada. Id. Plaintiff alleges that Russell Burns and Gil Crosthwaite are Trustees, and are the Chairman and Co-Chairman of the Board of Trustees of the Operating Engineers Pension Trust Fund, the Operating Engineers Vacation and Holiday Pay Plan, and the Operating Engineers Pensioned Operating Engineers Health and Welfare Trust Fund. Id. In addition, Plaintiff alleges that Nevada Construction Industry Promotion Bureau, Inc. and Northern Nevada Operating Engineers Contract Compliance Fund, Inc. (collectively referred to herein as the "Other Entities") are non-profit corporations created for the benefit of collectively bargaining employees, and receive contributions pursuant to multi-employer agreements. Id.
According to the First Amended Complaint, Plaintiff makes multiple monthly payments of trust fund contributions to various trust funds and entities, including trust funds and entities that benefit employees working in Local No. 3's jurisdiction and Local No. 12's jurisdiction. Id. at 4. Plaintiff claims that between 2002 and 2007, Plaintiff erroneously made contributions to the Trust Funds and Other Entities that benefit Plaintiff's employees who are members of Local No. 3 for work that these employees performed in Local No. 12's jurisdiction. Id. at 4. During that time frame, Plaintiff asserts that "instead of making trust fund contributions to the trust funds created for the benefit of [Plaintiff's] employees working within Local No. 12's jurisdiction, on a number of occasions, but not in every instance, Plaintiff paid trust fund contributions to Trust Funds and Other Entities created for the benefit of Local No. 3's employees, as a result of a mistake of law or a mistake of fact." Id. at 4-5. Plaintiff states that it made these payments mistakenly, "believing that Local No. 12 was subject to various employee travel agreements, key man agreements, or other agreements, which would permit the payment of contributions to Local No. 3 employees and to the applicable Trust Funds and Other Entities for those employees who were from Local No. 3 traveling and performing work in Local No. 12's jurisdiction." Id. at 5.
According to Plaintiff, as a result of this mistake, Plaintiff was sued on June 13, 2008, by the trustees of the various trust funds that benefit employees working within the jurisdiction of Local No. 12. Id. Plaintiff states that the object of the Local No. 12 lawsuit was to recover contributions which Plaintiff erroneously made to the Trust Funds and Other Entities of Local No. 3 which should have been made to the trust funds that benefit the jurisdiction of Local No. 12. Id. Plaintiff states that it settled the Local No. 12 lawsuit and agreed to pay $225,000.00 for its failure to make contributions to Local No. 12.
In this matter, Plaintiff argues that it erroneously made $165,265.07 in contributions to Local No. 3 Trust Funds and Other Entities which should have been paid to the trust funds that benefit Local No. 12. Id. According to Plaintiff, it mistakenly made the contributions to the Trust Funds and Other Entities for Local No. 3 rather than Local No. 12 because Plaintiff mistakenly relied on "travel agreements, key man agreements, and other agreements that would permit payment to the Trust Funds benefitting employees working in Local No. 3's jurisdiction, when such payments would normally be made to the Local No. 12 trust funds." Id.
Following the Local No. 12 lawsuit, Plaintiff states that it notified the Trust Funds and Other Entities of the payments made as a result of the mistake of law or fact in accordance with 29 U.S.C. § 1103(c)(2)(A), but that "no determination regarding the return of the mistakenly made contributions has been forthcoming" from the Trust Funds or Other Entities. Id. at 6. Because the Trust Funds and Other Entities have failed to make a determination regarding the return of the contributions which Plaintiff asserts were mistakenly made, Plaintiff states that it filed this action seeking a return of the contributions. Plaintiff states that "[i]n equity and good conscience, Plaintiff is entitled to restitution of the amounts paid to the Local No. 3 Trust Funds and Other Entities as the result of the mistake of fact or law." Id. at 7. Thus, Plaintiff seeks an award of damages in the amount of $165.265.07. Id.
DISCUSSION
Defendants seek to dismiss Plaintiff's First Amended Complaint on the grounds that it fails to state a claim for relief and fails to plead mistake with particularity. According to Defendants, Plaintiff fails to properly plead the elements of a refund claim under 29 U.S.C. § 1103(c)(2). In this regard, Defendants argue that Plaintiff has not exhausted its administrative remedies because there has been no determination by the Trust Funds as to whether the contributions were made by mistake. In addition, Defendants argue that Plaintiff has failed to assert that Defendants acted in an arbitrary or capricious manner in relation to Plaintiff's request for refund, and that Plaintiff has failed to allege any equities that favor an employer refund. Finally, Defendants argue that Plaintiff has not satisfied the particularity requirement of Rule 9(b) in asserting a claim based on mistake of law or fact.In response, Plaintiff states that it has properly alleged a claim arising under 29 U.S.C. § 1103(c)(2)(A) for the return of contributions made to Defendants as a result of a mistake of fact or a mistake of law. According to Plaintiff, it has complied with all administrative requirements imposed upon it because prior to commencing this lawsuit, it sought a refund request through Defendants. Plaintiff argues that Defendants' failure to make a determination on Plaintiff's request does not result in Plaintiff's failure to exhaust administrative remedies. In addition, Plaintiff asserts that it has pled with particularity its claim based on mistake. Plaintiff states that the allegations in the First Amended Complaint "cannot be more clear" and provide sufficient detail regarding the mistake of law or fact that caused the erroneous payment of contributions to the Defendants. Specifically, Plaintiff states that it has sufficiently alleged that it mistakenly relied upon existing agreements to which Defendants were a party when it paid contributions to Defendants in error.
I. Legal Standard
A. Rule 12(b)(6)
Dismissal under Rule 12(b)(6) is appropriate where the complaint lacks sufficient facts to support a cognizable legal theory. Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990). To sufficiently state a claim for relief and survive a 12(b)(6) motion, the pleading "does not need detailed factual allegations" but the "[f]actual allegations must be enough to raise the right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed. 2d 929 (2007). Mere "labels and conclusions" or a "formulaic recitation of the elements of a cause of action will not do." Id. Rather, there must be "enough facts to state a claim to relief that is plausible on its face." Id. at 570. In other words, "[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, ___ U.S. ___, 129 S.Ct. 1937, 1949, 173 L.Ed. 868 (2009) (internal quotation marks omitted). The Ninth Circuit has summarized the governing standard, in light of Twombly and Iqbal, as follows: "In sum, for a [pleading] to survive a motion to dismiss, the non-conclusory factual content, and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief." Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009) (internal quotation marks omitted).
In deciding whether to grant a motion to dismiss, the court must accept as true all "wellpleaded factual allegations" in the pleading under attack. Iqbal, 129 S.Ct. at 1950. A court is not, however, "required to accept as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences." Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). Nor is a court required to "accept as true allegations that contradict matters properly subject to judicial notice or by exhibit." Id. In a motion to dismiss, "[a] court may . . . consider certain materials — documents attached to the complaint, documents incorporated by reference in the complaint, or matters of judicial notice — without converting the motion to dismiss into a motion for summary judgment." United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003).
B. Rule 9(b)
Rule 9(b) requires that circumstances constituting fraud or mistake be pled with particularity. Fed.R.Civ.P. 9(b). In general, to comply with Rule 9(b), allegations of fraud and mistake must be specific enough to give defendants notice of the particular conduct which is alleged to constitute the fraud or mistake. Swartz v. KMPG LLP, 476 F.3d 756, 764 (9th Cir. 2007) (internal quotations omitted). In discussing this rule in the context of fraud claims, the Ninth Circuit has stated that the particularity requirement requires an account of the "time, place, and specific content of the false representation as well as the identities of the parties to the misrepresentations." Id. The "[a]verments of fraud must be accompanied by the who, what, when, where, and how of the misconduct charged." Kearns v. Ford Motor Co., 567 F.3d 1120, 1124 (9th Cir. 2009). Because Rule 9(b) also provides for greater particularity in all averments of mistake, general allegations of mistake are not sufficient. N.Y., New Haven, Hartford R.R. Co. v. New England Forwarding Co., 119 F.Supp. 380, 382 (D.R.I. 1953). The pleading must set forth enough facts to apprise the adversary of the particular "circumstances constituting" the claimed mistake. Fed.R.Civ.P. 9(b). Particulars such as the precise nature of the misunderstanding, when the mistake occurred, and which individuals made the mistake, have all been required. See, e.g., Mills v. Everest Reinsurance Co., 410 F.Supp. 2d 243, 248 (S.D.N.Y. 2006).
II. ERISA Refund Claim
ERISA provides that "the assets of a plan shall never inure to the benefit of any employer and shall be held for the exclusive purpose of providing benefits to participants in the plan and their beneficiaries and defraying reasonable expenses of administering the plan." 29 U.S.C. § 1103(c)(1). Thus, an ERISA plan may not give plan funds to an employer. An exception, however, is found in section 403(c)(2)(A)(ii). That provision provides that in the case of a contribution, "if such contribution or payment is made by an employer to a multiemployer plan by a mistake of fact or law, paragraph (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). The Ninth Circuit has determined that this section implies a private right of action for return of contributions. See Award Serv., Inc. v. N. California Retail Clerks Union, 774 F.2d 1391 (9th Cir. 1985) (reaffirming the implied right of action for return of mistakenly made contributions).
Although there is an implied right of action for return of contributions under section 1103(c)(2)(A)(ii), this refund is not automatic. Alaska Trowel Trades Pension Fund v. Lopez, 103 F.3d 881, 885 (9th Cir. 1996). Rather, it is a permissive repayment and "even if the employer can demonstrate the requisite mistake of fact or law; the employer must also show that the equities favor restitution." Id. (citing Award Serv., Inc., 763 F.2d at 1069) (stating that section 403 confers no right to refund expressly; "it merely permits the return of contributions mistakenly paid"); British Motor Car Distrib., Ltd. v. San Francisco Auto. Indus. Welfare, 882 F.2d 371, 374 (9th Cir. 1989) ("[A] showing of mistake of fact will not automatically result in a refund to the employer. After demonstrating that contributions resulted from a mistake, the employer must establish that the equities favor restitution.").
Here, Defendants argue that Plaintiff's claim should be dismissed because Plaintiff has failed to properly plead a refund claim under 29 U.S.C. § 1103(c)(2)(A) and Plaintiff has not pled its mistake claim with particularity. Based on the information before the Court, the Court finds that Plaintiff's allegations satisfy the requirements for asserting a claim for relief under section 1103(c)(2)(A) and that Plaintiff pleads mistake with Rule 9(b) particularity. Plaintiff asserts that it erroneously made contributions to the Trust Funds based on a mistake of fact or law. Further, Plaintiff asserts that it sought a refund from the plan administrator but that the plan administrator never made a determination on that issue. Finally, Plaintiff asserts that the equities favor a refund in this circumstance. Defendants argue that this is not sufficient because Plaintiff did not exhaust its administrative remedies and failed to assert that the Trust Funds acted in an arbitrary and capricious manner in failing to respond to Plaintiff's refund request. However, Defendants' arguments are without merit.
First, Plaintiff satisfied the administrative requirements under the statute. The statute states that a plan administrator may refund mistaken contributions "within 6 months after the plan administrator determines that the contribution was made by such a mistake." Here, Plaintiff asserts that it notified the plan administrator that it had made mistaken contributions in May 2009, but that the plan administrator has never made a determination on Plaintiff's claim. Because the plan administrator has failed to make a determination on Plaintiff's claim after nearly two years, the Court will allow Plaintiff to proceed with its lawsuit. See Alvan Motor Freight v. Trustees of the Central States, 2007 WL 6942283 (W.D. Mich. 2007) (stating that a plaintiff seeking relief under ERISA does not need to exhaust administrative remedies if it shows its efforts would be futile). Second, as to Defendants' second argument, the Ninth Circuit has never required that a plaintiff establish that a plan administrator act in an arbitrary and capricious manner in denying a refund request. Rather, the Ninth Circuit has expressly held that a plaintiff may be entitled to a refund if it shows that the contributions resulted from a mistake and the equities favor restitution. See British Motor Car Distrib., Ltd., 882 F.2d at 374.
The statute does not establish a time period within which a plan administrator must respond to a request for reimbursement. The statute also does not indicate any remedy if a plan administrator fails to make a determination on the issue of reimbursement. Because this issue is before the Court on a Rule 12(b) motion, there is no evidence on the issue of why the plan administrator has not made a determination in this matter.