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HARTLINE v. SHEET METAL WORKERS' NAT. PENSION FUND

September 14, 2000

ROBERT E. HARTLINE ET AT., PLAINTIFFS,
V.
SHEET METAL WORKERS' NATIONAL PENSION FUND ET AT., DEFENDANTS.



The opinion of the court was delivered by: Urbina, District Judge.

  MEMORANDUM OPINION

GRANTING THE TRUSTEE DEFENDANTS' MOTION To DISMISS; GRANTING THE SMWIA DEFENDANTS' MOTION To DISMISS; GRANTING IN PART AND DENYING IN PART THE PIAINTIFFS' MOTION To AMEND THE COMPLAINT; DENYING THE PLAINTIFFS' MOTION TO ORDER SETTLEMENT DISCUSSIONS AND STAY THE PENDING MOTIONS

I. INTRODUCTION

The named plaintiffs bring this consolidated action on behalf of themselves and on behalf of a class of all others similarly situated (collectively, with the named plaintiffs, "the plaintiffs") under sections 502(a)(1)(B), (a)(2), (a)(3) and 510 of the Employment Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1132 (a)(1)(B), (a)(2), (a)(3) and § 1140, against the Sheet Metal Workers' National Pension Fund (the "Pension Fund"), the Trustee defendants, and the SMWIA defendants. This court has subject matter-jurisdiction pursuant to ERISA section 502(e), 29 U.S.C. § 1132 (e). This court has supplemental jurisdiction over any other claims pursuant to 28 U.S.C. § 1367 (a). For the reasons stated herein, this court grants the Trustee defendants' motion to dismiss, grants the SMWIA defendants' motion to dismiss, grants in part and denies in part the plaintiffs' motion for leave to file a second amended complaint, and denies the plaintiffs' motion for referral to a magistrate judge for settlement discussions and for a stay of consideration of the pending motions during such discussions.

II. BACKGROUND

A. Facts

The named plaintiffs are retired employees of three different employer-participants in the Pension Fund. (Am. Compl. ¶¶ 5-11.) Each named plaintiff also is a member of a local union affiliated with the SMWIA and, at some time prior to their respective retirements, worked under the auspices of his respective local union. (Am.Compl. ¶ 10.) Each named plaintiff has been a participant and beneficiary of the Pension Fund within the meaning of ERISA sections 3(7) and 3(8), 29 U.S.C. § 1002 (7) and 1002(8), and is currently receiving a retirement pension from the Pension Fund. (Am.Compl. ¶ 11.)

The Pension Fund is an employee benefit plan within the meaning of ERISA section 3(3), 29 U.S.C. § 1002 (3), an employee pension benefit plan within the meaning of ERISA section 3(2), 29 U.S.C. § 1002 (2), a defined benefit plan within the meaning of ERISA section 3 (35), 29 U.S.C. § 1002 (35), and a multiemployer pension fund within the meaning ERISA section 3 (37)(A), 29 U.S.C. § 1002 (37)(A). (Am.Compl. ¶ 12.) The plaintiffs allege no substantive wrongdoing by the Pension Fund and have named the Pension Fund "solely for the purpose of relief" (Am.Compl. ¶ 12.)

The Board of Trustees of the Pension Fund is comprised of natural persons, half of whom have been appointed by the SMWIA and half of whom have been appointed by employers who contribute to the Pension Fund. (Am.Compl. ¶ 13.) The Board of Trustees as an entity is a fiduciary within the meaning of ERISA section 3 (21)(A), 29 U.S.C. § 1002 (21)(A). (Am. Compl. ¶ 13.) Defendants Arthur Moore, Matthew B. Hernandez, Jr., Clinton O. (Iowan, Jr., Bruce Stockwell, Alan J. Chermak, Ronald Palmerick, Robert J. Fanning, Cavet Snyder, Robert Custer, Ronald Simpson, Gordon Jones and Edward J. Carlough allegedly were directly responsible for the administration and operation of the Pension Fund, are or were members of the Board of Trustees and are or were fiduciaries within the meaning of ERISA section 3 (21)(A), 29 U.S.C. § 1002 (21)(A). (Am.Compl. ¶ 14.)

The SMWIA is a labor organization within the meaning of Labor Management Relations Act section 201(5), 29 U.S.C. § 1002 (5), and is the current or former employer of certain named plaintiffs and members of the putative class. (Am. Compl. ¶ 16.) The SMWIA is affiliated with many local unions throughout the United States (the "locals"), each of which bargains collectively with employers in its jurisdiction on behalf of its members, who also are members of the SMWIA. (Am. Compl. ¶ 21.) The collective bargaining agreements entered into by the majority of the locals require the signatory employers to contribute to the Pension Fund on behalf of their employees who are members of the local. (Am.Compl. ¶ 21.) The contribution rate varies from one local to another. (Am.Compl. ¶ 21.)

The Pension Fund also receives contributions from employers that are not parties to collective bargaining agreements but that are related to SMWIA (the "Related Employers"). (Am.Compl. ¶ 23.) The Related Employers include the SMWIA, the National Training Fund for the Sheet Metal & Air Conditioning Industry ("NTF") and the National Energy Management Institute ("NEMI"). (Am. Compl. ¶ 23.) The Related Employers have employees who are both members and non-members of the SMWIA. (Am. Compl. ¶ 23.) Related Employers contribute to the Pension Fund pursuant to "Participation Agreements" rather than collective bargaining agreements. (Am. Compl. ¶ 24.) The Pension Fund's Board of Trustees allegedly unilaterally sets the contribution rates to be paid by the Related Employers. (Am.Compl. ¶ 24.) The Trustee defendants set non-uniform contribution rates for the SMWIA, the NTF and the NEMI to pay on behalf of their SMWIA-member employees. (Am. Compl. ¶ 24.) The contribution rate paid on behalf of any such employee is the rate established by collective bargaining by that employee's "home local union." (Am. Compl. ¶ 25.) The SMWIA makes no Pension Fund contributions on behalf of any SMWIA employee whose local union has not negotiated for employers in its jurisdiction to make Pension Fund contributions and, therefore, such employees are ineligible for Fund benefits. (Am. Compl. ¶ 26.) The NTF makes Pension Fund contributions on behalf of any NTF employee whose local union has not negotiated to require employers in its jurisdiction to make Pension Fund contributions. (Am.Compl. ¶ 26.) However, the NTF makes such contributions at a rate arbitrarily selected by the Defendants. (Id.) The plaintiffs contend that this system sets contribution rates and, therefore, pension amounts, without any relation to a participant's employer, job, duties, or salary. (Am.Compl. ¶ 26.)

The plaintiffs assert eight claims. They assert the first, second, third, fifth, seventh, and eighth claims only against the Trustee defendants, and the fourth and sixth claims only against the SMWIA defendants. The plaintiffs contend that the Trustee defendants breached their fiduciary duty under ERISA section 404(a)(1), 29 U.S.C. § 1104 (a)(1), by establishing non-uniform. Pension Fund contribution rates for contributions by the plaintiffs' former employers on behalf of the plaintiffs. (Am. Compl. Claims 1, 2 and 3) The plaintiffs ask that the pension plan be reformed to provide higher pension benefit levels. (Id.) The plaintiffs further assert that the Trustee defendants acted arbitrarily and capriciously in setting contribution rates that the SMWIA, the NTF and the NEMI would pay on behalf of class members. (Am.Compl. ¶ 29.) The plaintiffs contend that the contribution rate system creates a disparity in pension-benefit computations among the class and that the disparity: (1) is not required by any provision of the Pension Fund or ERISA, (2) bears no rational relation to any legitimate purpose of the Pension Fund and (3) is antithetical to the fiduciary requirements of ERISA section 404(a)(1), 29 U.S.C. § 1104 (a)(1). (Am.Compl. ¶ 29.) The plaintiffs allege that employers of certain SMWIA, NTF, and/or NEMI employees contributed at the "Maximum Contribution Rate" — the prevailing highest contribution rate paid by any employer contributing to the Pension Fund — and, therefore, those employees will receive pension benefits based on that rate. (Am.Compl. ¶¶ 18 and 30.) The plaintiffs seek permanent injunctive relief reforming the Pension Fund to require that the pension-benefit calculation for class members be based on the Maximum Contribution Rate. (Am.Compl. ¶ 31.)

The plaintiffs also allege that the SMWIA, at the direction of Arthur Moore, stopped contributing to the Pension Fund on behalf of its participating employees. (Am.Compl. ¶ 34, Claim 4.) The plaintiffs claim this action by the SMWIA violates ERISA section 510, 29 U.S.C. § 1140, because it was in retaliation for the commencement of the instant action. (Am. Compl. ¶¶ 36 and 37.)

The plaintiffs contend that the Trustee defendants' failure and refusal to seek the payment of contributions due from the SMWIA constitutes a breach of their fiduciary duties. (Am.Compl. ¶¶ 38 and 39; Claim 5.) According to the plaintiffs, the SMWIA contributed for 1,400 hours of employment per year rather than the actual 2,080 hours for which all other contributing employers pay; in addition, the plaintiffs allege that the SMWIA paid contributions in a one-time annual payment rather than monthly as did all other contributing employers, and never paid interest on the delinquent contributions. (Am.Compl. ¶¶ 40 and 41; Claim 6.) The plaintiffs assert that the Trustee defendants breached their fiduciary duties by not attempting to collect contributions from the SMWIA based on all hours for which its employees were paid and by not attempting to collect interest from the SMWIA for its delinquent contributions or to enforce a monthly payment schedule. (Am.Compl. ¶ 42, Claim 7.)

The plaintiffs further maintain that Arthur Moore and other Board members are in an incurably conflicted position because they caused SMWIA to stop its Pension Fund contributions and/or acquiesced to SMWIA's stopping of contributions. (Am. Compl. ¶ 43; Claim 8.)

The plaintiffs seek, inter alia that the court: (1) certify this action as a class action, (2) declare that the Pension Fund's terms violate ERISA, (3) reform the Pension Fund retroactively to the first Participation Agreement between the Pension Fund and the SMWIA, the NTF or the NEMI to require that each class member receive benefits calculated from the Maximum Contribution Rate, (4) order the defendants to pay pension benefits prospectively to all class members pursuant to the reformed Pension Fund and (5) order the defendants to pay retroactive pension benefits to all class members who already have received pension benefits. (Am. Compl., Prayer for Relief.)

B. Procedural History

This case was transferred to this court from the Eastern District of New York on May 21, 1998 pursuant to 28 U.S.C. § 1404 (a) upon the defendants' motion. On August 27, 1998, this court denied without prejudice the defendants' pending motions to dismiss ("August 27, 1998 Order"). On May 4, 1999, upon considering the parties' cross-motions, this court ruled that it "will engage in an independent analysis of the plaintiffs' claims using as binding precedent the decisions of the Court of Appeals of the District of Columbia Circuit and the Supreme Court only." ("May 4, 1999 Order.")

On June 29, 1999, the Trustee defendants moved to dismiss the amended complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure ("TDs' Mot. to Dismiss"). On August 5, 1999, the plaintiffs opposed the Trustee defendants' motion to dismiss ("Opp'n to TDs' Mot. to Dismiss"). On September 13, 1999, the Trustee defendants replied to the plaintiffs' opposition to the Trustee defendants' motion to dismiss ("TDs' Reply").

On June 29, 1999, the SMWIA defendants also moved to dismiss the amended complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure ("SDs' Mot. to Dismiss"). On August 5, 1999, the plaintiffs opposed the SMWIA defendants' motion to dismiss ("Opp'n to SD's Mot. to Dismiss"). On September 13, 1999, the SMWIA defendants replied to the plaintiffs' opposition to the SMWIA defendants' motion to dismiss ("SDs' Reply").

On August 5, 1999, in the plaintiffs' opposition to the Trustee defendants' motion to dismiss, the plaintiffs moved to amend their complaint and to file a second amended complaint with respect to the claims against the Trustee defendants, that is, the first, second, third, fifth, seventh and eighth claims. (Opp'n to TDs' Mot. to Dismiss at 44.) On September 13, 1999, the Trustee defendants opposed the plaintiffs' request to amend the amended complaint. (TDs' Reply at 24.)

On August 5, 1999, in the plaintiffs' opposition to the SMWIA defendants' motion to dismiss, the plaintiffs also moved to amend their complaint and to file a second amended complaint with respect to the claims against the SMWIA defendants, that is, the fourth and sixth claims. (Opp'n to SDs' Mot. to Dismiss at 20-21.) The SMWIA defendants did not oppose the plaintiffs' motion.

On December 22, 1999, the plaintiffs moved to refer this matter to a magistrate judge for settlement discussions and to stay consideration of the pending motions during such discussions ("Mot. for Settlement Discussions"). On January 3, 2000, the SMWIA defendants opposed this motion for settlement discussions ("SDs' Opp'n to Mot. for Settlement Discussions"). Likewise, on January 4, 2000, the Trustee defendants opposed the motion ("TDs' Opp'n to Mot. for Settlement Discussions"). On January 11, 2000, the plaintiffs replied in support of their motion for settlement discussions ("Reply in Supp. of Mot. for Settlement Discussions").

III. LEGAL STANDARD

A motion to dismiss for failure to state a claim upon which relief can be granted tests not whether the plaintiff will prevail on the merits, but instead whether the claimant has properly stated a claim. See Schemer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974); FED. R.Civ.P. 12(h)(6). The court may dismiss a complaint for failure to state a claim only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations. See Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984); Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). In deciding such a motion, the court must accept as true all well-pleaded factual allegations and draw all reasonable inferences in the plaintiffs' favor. See Metropolitan Wash. Airports Auth. v. Citizens for the Abatement of Aircraft Noise, 501 U.S. 252, 264, 111 S.Ct. 2298, 115 L.Ed.2d 236 (1991); Talenti v. Clinton, 102 F.3d 573, 574 (D.C.Cir. 1996); accord Antonelli v. Sheahan, 81 F.3d 1422, 1427 (7th Cir. 1996). While the court must accept all well-pled allegations of fact, allegations that are overbroad and unsupported by specific factual averments are insufficient to state a claim upon which relief may be granted. See DeVoren Stores, Inc. v. Philadelphia, 1990 WL 10003, *1, *3 (E.D.Pa. 1990); Crowder it Jackson, 527 F. Supp. 1004, 1006 (W.D.Pa. 1981). In addition, the court need not accept as true the plaintiffs' legal conclusions. See Papasan v. Allain, 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986); Taylor v. F.D.I.C., 132 F.3d 753, 762 (D.C.Cir. 1997). Nor need the court accept unsupported assertions, unwarranted inferences or sweeping legal conclusions cast in the form of factual allegations. See Miree v. DeKalb County, 433 U.S. 25, 27, 97 S.Ct. 2490, 53 L.Ed.2d 557 (1977); Kowal v. MCI Communications Corp., 16 F.3d 1271, 1276 (D.C.Cir. 1994). In addition, the court need not assume the existence of facts that would eliminate a defense. See Droppleman v. Horsley, 372 F.2d 249 (10th Cir. 1967); Johnson v. MacCoy, 278 F.2d 37 (9th Cir. 1960). The court may consider the allegations of the complaint, documents attached to or specifically referred to in the complaint, and matters of public record. See 5A Wright & Miller, Federal Practice & Procedure § 1357 at 299 (2d ed. 1990).

IV. ANALYSIS

A. The Trustee Defendants' Motion to Dismiss

The amended complaint alleges that the Trustee defendants breached their fiduciary duty under ERISA section 404(a)(1) by: (1) establishing non-uniform contribution rates (Am.Compl. Claims 1, 2, and 3); (2) failing to seek payment on overdue contributions (Am.Compl. Claim 5); and (3) not attempting to collect contributions from the SMWIA based on the hours for which its employees were paid and for not collecting interest for delinquent contributions or enforcing a monthly payment schedule (Am.Compl. Claim 7.). The plaintiffs also assert that the Trustee defendants should be removed from the Board of Trustees because they are subject to an incurable conflict of interest (Am.Compl. Claim 8). The Trustee defendants contend that the plaintiffs' claims should be dismissed because the court could grant no relief for them under any set of facts that could be proved consistent with the allegations in the amended complaint. The court will address each claim in turn.

1. Claims 1, 2 and 3: ERISA Section 404(a)(1) and the Use of Non-Uniform Contribution Rates

The plaintiffs assert that the Trustee defendants breached their fiduciary duty under ERISA section 404(a)(1) by setting non-uniform contribution rates for Pension Fund contributions by the plaintiffs' former employers. (Am.Compl. Claims 1, 2 and 3.) The Trustee defendants contend that the plaintiffs' ERISA section 404(a)(1) claims fail because: (1) the Trustee defendants are subject to the fiduciary standards of ERISA only, (2) under ERISA, trustees of a multi-employer pension plan do not engage in a fiduciary function in designing or amending a pension plan, and (3) establishing contribution rates is inherently a pension plan design, not fiduciary, function. (TDs' Mot. to Dismiss at 2, 10.) The plaintiffs dispute each of these contentions. (Opp'n to TDs' Mot. to Dismiss at 6.)

(a) ERISA Defines the Trustee Defendants' Fiduciary Responsibility

In determining whether the Trustee defendants breached a fiduciary duty to the plaintiffs, the plaintiffs urge this court to consider not only ERISA, but also the Taft-Hartley Act, 29 U.S.C. § 141 et seq., and the common law of trusts. (See Pls.' Opp'n at 8-9, 20-23, 26, 37-38.) For the reasons that follow, the court concludes that only ERISA, and not the common law of trusts nor the Taft-Hartley Act, defines the Trustee defendants' fiduciary duties in this matter. The plaintiffs claim that the Trustee defendants breached their fiduciary duties to the plaintiffs under ERISA § 404(a)(1), 29 U.S.C. § 1104 (a)(1). (Pls.' Opp'n at 23-26.) ERISA section 404(a)(1), which sets forth a fiduciary's duties, provides in relevant part:

[A] fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and —

(A) for the exclusive purpose of

(i) providing benefits to participants and their ...

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