Opinion
Civ. No. 02-992 (RHK/AJB).
July 2, 2003.
Pamela H. Nissen, McGrann, Shea, Anderson, Carnival, Straughn Lamb, Chartered, Minneapolis, Minnesota, Attorneys for Plaintiffs.
Ronald L. Seeger, John B. Arnold and Sharon C. Zehe, Dunlap Seeger, P.A., Rochester, Minnesota, Attorneys for Defendants.
MEMORANDUM OPINION AND ORDER
Introduction
Plaintiff Minnesota Laborers Health and Welfare Fund, Minnesota Laborers Pension Fund, Minnesota Laborers Vacation Fund, Construction Laborers Education and Training Fund of Minnesota and North Dakota, and Minnesota Laborers Employers Cooperation and Education Trust ("the Plaintiff Funds") are multi-employer, jointly-trusteed fringe benefit plans created, maintained, and administered in accordance with various provisions of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq. and the Labor Management Relations Act ("LMRA"), 29 U.S.C. § 186(c).
Defendant Richard Swenke is the sole shareholder and president of Defendant Swenke Company, Inc. ("SCI"), which he incorporated in Minnesota in 1984. SCI installs both sewer mains and water mains for residential and commercial properties. SCI describes itself as a "nonunion" facility; of the approximately twenty-five laborers and equipment operators at SCI, only seven are union members.
Swenke has also purported to operate, since the mid-1990s, a sole proprietorship called Zumbro Valley Contracting ("ZVC"). According to Swenke, ZVC also installs sewer mains and water mains for residential and commercial properties and "functions primarily as a subcontractor to [SCI]." (Defs.' Mem. Supp. Mot. for Summ. J. at 2.) Defendants contend that ZVC has recognized the Construction Laborers Union, Local 405 ("Laborers Union") as the bargaining representative for seven employees and, as part of that recognition, agreed to pay certain fringe benefits to the Plaintiff Funds on behalf of those union employees.
In 2001, the Plaintiff Funds performed an audit of ZVC's employment records for calendar years 1999 and 2000. The records Swenke produced for the audit, however, were SCI corporate payroll records which demonstrated that the seven union employees were paid by SCI, not ZVC. Following the audit, the Plaintiff Funds submitted an invoice to ZVC for unpaid fringe benefit contributions for the nonunion employees of SCI. When ZVC refused to pay the invoice, the Plaintiff Funds filed suit against Swenke (doing business as ZVC) and SCI, alleging that ZVC is a sham business, that SCI is the "alter ego" of ZVC and therefore bound by the Collective Bargaining Agreement ("CBA"), and that Swenke and/or SCI should have been making fringe benefit contributions to the Funds for all the employees of SCI, not just the handful of union employees.
The Plaintiff Funds brought suit against Swenke and SCI, asserting federal question jurisdiction under § 502(e)(1) of ERISA. (First Am. Compl. ¶ 8.) Before the Court are the parties' cross motions for summary judgment.
Section 502(e)(1) provides that
[e]xcept for actions under subsection (a)(1)(B) of this section, the district courts of the United States shall have exclusive jurisdiction of civil actions under this subchapter brought by the Secretary or by a participant, beneficiary, fiduciary, or any person referred to in section 1021(f)(1) of this title. State courts of competent jurisdiction and district courts of the United States shall have concurrent jurisdiction of actions under paragraphs (1)(B) and (7) of subsection (a) of this section.29 U.S.C. § 1132(e)(1).
Analysis
I. Standard of Decision
Summary judgment is proper if, drawing all reasonable inferences favorable to the non-moving party, there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c);Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986);Anderson v. Liberty Lobby. Inc., 477 U.S. 242, 249-50 (1986). The moving party bears the burden of showing that the material facts in the case are undisputed. See Celotex, 477 U.S. at 322; Mems v. City of St. Paul, Dep't of Fire Safety Servs., 224 F.3d 735, 738 (8th Cir. 2000). The court must view the evidence, and the inferences that may be reasonably drawn from it, in the light most favorable to the nonmoving party. See Graves v. Arkansas Dep't of Fin. Admin., 229 F.3d 721, 723 (8th Cir. 2000); Calvit v. Minneapolis Pub. Schs., 122 F.3d 1112, 1116 (8th Cir. 1997). The nonmoving party may not rest on mere allegations or denials, but must show through the presentation of admissible evidence that specific facts exist creating a genuine issue for trial. See Anderson, 477 U.S. at 256; Krenik v. County of Le Sueur, 47 F.3d 953, 957 (8th Cir. 1995).
The Plaintiff Funds argue that they are entitled to summary judgment because, as a matter of law, SWI is the alter ego of ZVC and is jointly and severally liable to the Plaintiff Funds for obligations arising under the CBA, namely, contributions to the benefit funds on behalf of SWI's non-union employees. The Plaintiff Funds further contend that SWI has effectively bound itself to the CBA, having held itself out as a union contractor and conducted itself in a manner demonstrating its intent to be bound by the CBA. Finally, the Plaintiff Funds assert that they are entitled to judgment against Richard Swenke, in his individual capacity, for unpaid benefit plan contributions, either as the sole proprietor of ZVC or as the sole shareholder and officer of SWI.
The Defendants move for summary judgment on four grounds: (1) the Plaintiff Funds lack standing under § 502 of ERISA, 29 U.S.C. § 1132; (2) the Court lacks subject matter jurisdiction over the Plaintiff Funds' claims because those claims are essentially a breach of contract action and the Plaintiff Funds have failed to exhaust their remedies under the collective bargaining agreement; (3) the Court lacks subject matter jurisdiction over the Plaintiff Funds' claims because giving the Plaintiff Funds the relief they seek would force nonunion employees of Swenke Company into a bargaining unit not of their own choosing in violation of § 7 the National Labor Relations Act, 29 U.S.C. § 157, an issue over which the National Labor Relations Board has exclusive jurisdiction; and (4) the Plaintiff Funds' claim of "alter ego" liability fails on the merits because they cannot demonstrate an essential element of "alter ego" liability — anti-union animus. The Court begins with the Defendants' arguments touching on this Court's jurisdiction.
II. Standing under ERISA
Defendants move to dismiss this action on the grounds that the Plaintiff Funds lack standing to sue under ERISA for the relief requested in the First Amended Complaint. Specifically, Defendants argue that a party must be a "participant, beneficiary, or fiduciary" in order to bring a claim pursuant to sections 502(a)(3) and 515 of ERISA for unpaid contributions to a multi-employer benefit plan. Defendants contend that the Plaintiff Funds, in and of themselves, are neither "participants," "beneficiaries," nor "fiduciaries," and therefore cannot maintain a claim under § 502(a) for unpaid contributions. Defendants rely on two earlier opinions from this Court, each of which holds that ERISA does not empower an employee benefit plan to pursue claims on its own behalf. See Anoka Orthopaedic Assocs., P.A. v. Mutschler, 773 F. Supp. 158, 162 (D. Minn. 1991) (Doty, J.); Kahler Corp. v. John Hancock Mut. Life Ins. Co., Civ. No. 4-88-1109, 1989 WL 119176 at *9-10 (Minn. Oct. 2, 1989) (Rosenbaum, J.). Both opinions from this district, after noting a lack of Eighth Circuit precedent, followed the majority of cases from other jurisdictions in holding that a federal district court lacks subject matter jurisdiction over a benefit plan's claims under § 502(a) of ERISA.
Section 502(a)(3) of ERISA provides that a civil action may be brought, inter alia,
by a participant, beneficiary, or fiduciary (A) to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan;29 U.S.C. § 1132(a)(3). Section 515 of ERISA pertains to contributions to multi-employer plans:
[e]very employer who is obligated to make contributions to a multiemployer plan under the terms of the plan or under the terms of a collectively bargained agreement shall, to the extent not inconsistent with law, make such contributions in accordance with the terms and conditions of such plan or such agreement.29 U.S.C § 1145.
At oral argument on the motions in this case, the Plaintiff Funds informed the Court that, less than one week earlier, Judge Magnuson had issued a memorandum and order in Minnesota Laborers Health and Welfare Fund, et al., v. Greenworks. Inc., Civ. No. 03-888 (PAM/RLE) on the same issue. The plaintiffs inGreenworks are the same multi-employer benefit plans as are before the Court in this case. Greenworks, slip op. at 1 (Minn. June 20, 2003). Greenworks moved for judgment on the pleadings pursuant to Rule 12(c) on the ground that the plaintiff funds lacked standing under ERISA to bring an action for unpaid contributions. Id.
Judge Magnuson recognized two competing concerns presented by Greenworks' motion: on the one hand, the limited jurisdiction of a federal district court cannot be expanded without clear direction from Congress; on the other hand, dismissal of the suit would not advance the resolution of the dispute in any material way and would mean, as a practical matter, only that the funds would file the same action the next day in the name of their boards of directors or trustees. Id. at 4. In the end, the Court concluded that Constitutional dictates of jurisdiction outweighed the inconveniences posed by dismissing the lawsuit. Id.
The language of ERISA is clear: this Court has jurisdiction only over lawsuits brought by participants in, fiduciaries for, or beneficiaries of ERISA plans. 29 U.S.C. § 1132(e)(1). Plaintiffs here are none of those things. Therefore, the Court lacks subject matter jurisdiction and the case must be dismissed.Id. at 5. In reaching this determination, Judge Magnuson rejected the funds' argument that § 502(d)(1) of ERISA authorized their suit by recognizing an employee benefit plan as an entity that "may sue or be sued under this subchapter." 29 U.S.C. § 1132(d)(1). This Court cited with approval the Second Circuit's analysis that the language of § 502(d) is not inconsistent with the jurisdiction limits of § 502(e) because § 502(d) only establishes a plan's right to sue or be sued like a corporation or any other legal entity. Id. at 3 (quotingPressroom Unions — Printers League Income Sec. Fund v. Continental Assurance Co., 700 F.2d 889, 893 (2d Cir. 1983)). The Court finds the analysis and ultimate decision inGreenworks to be persuasive.
Judge Magnuson observed that (1) a split of authority exists among the circuits as to whether a plan may bring suit under ERISA, (2) the Eighth Circuit has not spoken on the issue, and (3) the only reported decision from this District — theAnoka Orthopaedic Associates case — followed the majority rule. Greenworks, slip op. at 2-4.
In opposing the Defendants' motion for summary judgment, the Plaintiff Funds raise an additional argument that appears not to have been considered in the decisions discussed above. The Plaintiff Funds contend that the Supreme Court has permitted a lawsuit brought directly by a benefits fund for unpaid contributions. Laborers Health and Welfare Trust Fund for Northern California v. Advanced Lightweight Concrete Co., Inc., 484 U.S. 539 (1988). In Advanced Lightweight, the Court stated that "the trustees of the eight plans (petitioners)3 brought suit in the Federal District Court for the Northern District of California against respondent to collect contributions for the period after June 15, 1983." 484 U.S. at 543 (footnote in original). The footnote in that sentence indicated that "[t]he named parties are the plans, rather than the trustees, but the relevant statute refers to an action `by a fiduciary for or on behalf of a plan.'" Id. at 543 n. 3 (quoting 29 U.S.C. § 1132(g)(2)). On this slender basis, the Plaintiff Funds contend that a plan may sue in its own name to collect contributions. Their argument is not persuasive.
The parties in Advanced Lightweight do not appear to have briefed whether the benefit plans themselves had standing to proceed with a collection action under ERISA. It is an issue that receives no substantive analysis by the Court. Furthermore, the Plaintiff Funds' reading of footnote three in the Advanced Lightweight opinion would read the phrase "[i]n any action under this subchapter by a fiduciary" out of § 502(g)(2) entirely, whereas the term "fiduciary" is expressly defined in ERISA. 29 U.S.C. § 1002(21)(A). The Plaintiff Funds did not allege in their First Amended Complaint that they are fiduciaries, and have made no such argument to the Court on summary judgment. The Court will not hang subject matter jurisdiction on so slender a thread.
Ultimately, the Plaintiff Funds contend that, "if the Court finds that [they] lack standing to sue under ERISA . . . then Plaintiffs should be allowed to add the Funds' Trustees as plaintiffs under Federal Rule of Civil Procedure, Rule 21, and to amend their complaint under Federal Rule of Civil Procedure, Rule 15, to plead jurisdiction under § 301 of the Labor Management Relations Act." (Pls.' Mem. Opp'n to Summ. J. at 8.) Having determined that it lacks subject matter jurisdiction under § 1132(e)(1), the Court cannot entertain a motion to add parties or amend the pleadings.
Conclusion
Based on the foregoing, and all of the files, records, and proceedings herein, IT IS ORDERED that the Defendants' Motion for Summary Judgment (Doc. No. 21) is GRANTED on the grounds that the Court lacks subject matter jurisdiction over this action under ERISA. The Plaintiff Funds' First Amended Complaint (Doc. No. 12) is DISMISSED WITHOUT PREJUDICE.