United States District Court, D. Idaho
MEMORANDUM DECISION AND ORDER
W. DALE JUDGE
Donnie Ely, a participant in the Pace Industry Union
Management Pension Fund (PIUMPF or the Fund), challenges an
action taken by the PIUMPF Board of Trustees in 2013, whereby
the Board amended its Rehabilitation Plan to require
withdrawing employers to pay an additional exit fee based on
the Fund's accumulated funding deficiency (the “AFD
Exit Fee”). Ely alleges that the AFD Exit Fee is
undermining PIUMPF's solvency, and that the actions taken
by the Board of Trustees violate the Employee Retirement
Income Security Act of 1974 (ERISA).
the Court is the Board of Trustees' motion to dismiss,
and its motion to stay discovery. (Dkt. 16, 17.) The Court
conducted a hearing on the motions on November 13, 2018.
After carefully considering the parties' arguments, their
written memoranda, and relevant authority, the Court will
grant in part and deny in part the Board of Trustees'
motion to dismiss, and deny the motion to stay discovery.
is an employee pension benefit plan as defined by 29 U.S.C.
§ 1002(3)(2)(A) and a multiemployer pension plan within
the meaning of 29 U.S.C. § 1002(37). PIUMPF is governed
by its Trust Agreement, restated as of April 2, 2000, and as
amended thereafter. One-half of the members of the Board of
Trustees are appointed by participating employers, and the
other one-half are appointed by the sponsoring labor union.
Trust Agreement, Ex. 1 (Dkt. 1-1); 29 U.S.C. §
186(c)(5)(B) (stating that employers must be “equally
represented in the administration” of a pension fund).
The Board of Trustees is the Fund's sponsor, meaning it
is tasked with administering the Fund. Trust Agreement, Ex. 1
(Dkt. 1-1); 29 U.S.C. § 1002(16)(B) (defining plan
sponsor). In addition, the Board of Trustees is designated as
the named fiduciary of the Trust and Plan. Trust Agreement
Ex. 1 (Dkt. 1-1.)
a participant in the Fund. The Fund currently is in critical
status (and has been since 2010), which means that it is in
dire financial condition. See 29 U.S.C.§
1085(b)(2), ERISA § 305(b)(2) (defining critical
status). Because of its critical status, specific funding
rules required the Board of Trustees to adopt a
rehabilitation plan for the Fund. See 29 U.S.C.
§ 1085(a)(2) (requiring the plan sponsor of a plan in
critical status to adopt and implement a rehabilitation plan
in accordance with 29 U.S.C. § 1085(e), ERISA §
305(e)). A rehabilitation plan consists of actions, such as
reductions in future benefit accruals, reductions in plan
expenditures, or increases in contributions, designed to
improve the Fund's financial outlook and enable it to
either “cease to be in critical status by the end of
the [ten-year] rehabilitation period, ” or
“emerge from critical status at a later time or to
forestall possible insolvency.” 29 U.S.C. §
1085(e)(3)(A), ERISA § 305(e)(3)(A).
April 30, 2010, the Board of Trustees published a Notice of
Critical Status Certification for the Fund, explaining to the
The Fund is considered to be in critical status because it
has funding or liquidity problems, or both. More
specifically, the Fund's actuary determined that the Fund
is projected to have an accumulated funding deficiency within
three (3) years after the current Plan Year. The projected
year of the deficiency is 2013.
Rehabilitation Plan and Possibility of Reduction in
Federal law requires pension plans in critical status to
adopt a rehabilitation plan aimed at restoring the financial
health of the Fund ….
the Board of Trustees determined that the contribution rate
increase schedules provided under the initial rehabilitation
plan were not reasonable and would cause employers to
withdraw from the Fund, thereby expediting rather than
forestalling insolvency. Thus, by Resolution dated April 10,
2013, the Trustees retroactively adopted, as of November 15,
2012, the 2012 Amended and Updated Rehabilitation Plan
(“Amended and Updated Rehabilitation Plan”).
Compl. Ex. 4. The Amended and Updated Rehabilitation Plan had
contribution rate schedules requiring lower annual increases
to the contribution rate.
addition to the revised schedules, the Amended and Updated
Rehabilitation Plan added a paragraph that included the AFD
Exit Fee. This paragraph states in pertinent part:
In addition, in the event an Employer withdraws during a Plan
Year when the Fund has an accumulated funding deficiency,
determined under Section 304 of ERISA, the Employer shall be
responsible for its pro rata share of such deficiency in
addition to any withdrawal liability determined under Section
4211 of ERISA.
seeks a declaration that the AFD Exit Fee implemented via the
Amended and Updated Rehabilitation Plan is unenforceable, and
that the Board of Trustees should be enjoined from further
enforcement or implementation of the AFD Exit Fee on behalf
of the PIUMPF. The Complaint asserts three counts for
violations of ERISA.
Count I, Ely alleges 29 U.S.C. § 1451(a)(1), ERISA
§ 4301(a)(1), permits him to bring an action for
appropriate legal or equitable relief as a participant
“adversely affected by an act or omission of a party
under ERISA Title IV, Subtitle E.” He asserts that, by
implementing the AFD Exit Fee, the Board of Trustees violated
29 U.S.C. § 1391, ERISA § 4211, and 29 C.F.R.
§ 4211.21(c), which “prohibits any withdrawal
liability allocation method that results in a systematic and
substantial over-allocation of the plan's unfunded vested
benefits (assessing employers amounts greater than the amount
of vested liabilities less the plan's assets).”
Compl. ¶ 25. Ely alleges also in Count I that the AFD
Exit Fee violates 29 U.S.C. § 1085(e)(3)(A)(ii), ERISA
§ 305(e)(3)(A)(ii), because it is not a
“reasonable measure to emerge from critical status at a
later time or to forestall possible insolvency.” 29
U.S.C. § 1085(e)(3)(A)(ii), ERISA §
305(e)(3)(A)(ii). Ely contends that, rather than a reasonable
measure, the AFD Exit Fee has caused PIUMPF's decline in
value, such that the Plan is projected to be unable to pay
benefits to its participants in 2031.
Count II, Ely alleges the Board of Trustees breached its
fiduciary duty of prudence. Ely contends the AFD Exit Fee is
imprudent because it is a second, and impermissible, way to
collect unfunded vested benefits, and because it delays,
rather than prevents, insolvency. In Count III, he alleges a
breach of co-fiduciary duty against the individual Trustees,
for failure to act prudently and failure to discharge their
duties with respect to the Plan solely in the interest of
plan participants and beneficiaries.
Board of Trustees argues that Count I must be dismissed,
because 29 U.S.C. § 1451(a)(1), ERISA § 4301(a)(1),
does not provide a cause of action to challenge a
rehabilitation plan adopted pursuant to 29 U.S.C. §
1085(e), ERISA § 305(e). As for Counts II and III, the
Board of Trustees argues dismissal is proper because the
Board was not acting in a fiduciary capacity, but rather in
its capacity as a settlor of the plan, when it adopted the
Amended and Updated Rehabilitation Plan.
response to the Board of Trustees' motion to dismiss, Ely
raised additional arguments addressed by the Board of
Trustees in its reply. He alleges the AFD Exit Fee violates
ERISA's “anti-cutback provision, 29 U.S.C. §
1054(g)(1), ERISA § 204(g)(1); that proper notice of
amendment to the rehabilitation plan was not given to plan
participants, in violation of 29 U.S.C. § 1054(h), ERISA
§ 204(h); and that the Board of Trustees' actions in
delaying, but not preventing, insolvency of the Plan by
implementing the AFD Exit Fee violates 29 U.S.C. §
1085(e)(3)(A)(ii), ERISA § 305(e)(3)(A)(ii). The Board
of Trustees notes none of these theories of recovery were
mentioned in the Complaint. Nonetheless, the Board of
Trustees argues amendment would be futile because ERISA
§ 204(g)(1) and (h) do not apply to plan amendments
adopted pursuant to ERISA § 305(e), and Ely's
interpretation of ERISA § 305(e)(3)(A)(ii) is not
supported by the plain language of the statue.
motion to dismiss made pursuant to Federal Rule of Civil
Procedure 12(b)(6) tests the sufficiency of a party's
claim for relief. When considering such a motion, the
Court's inquiry is whether the allegations in a pleading
are sufficient under applicable pleading standards. Federal
Rule of Civil Procedure 8(a) sets forth minimum pleading
rules, requiring only a “short and plain statement of
the claim showing that the pleader is entitled to
relief.” Fed.R.Civ.P. 8(a)(2).
motion to dismiss will be granted only if the complaint fails
to allege “enough facts to state a claim to relief that
is plausible on its face.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007). “A claim has
facial plausibility when the plaintiff pleads factual content
that allows the court to draw the reasonable inference that
the defendant is liable for the misconduct alleged. The
plausibility standard is not akin to a ‘probability
requirement,' but it asks for more than a sheer
possibility that a defendant has acted unlawfully.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
(citations omitted). Although “we must take all of the
factual allegations in the complaint as true, we are not
bound to accept as true a legal conclusion couched as a
factual allegation.” Id. at 1949-50; see
also Manzarek v. St. Paul Fire & Marine Ins. Co.,
519 F.3d 1025, 1031 (9th Cir. 2008). Therefore,
“conclusory allegations of law and unwarranted
inferences are insufficient to defeat a motion to dismiss for
failure to state a claim.” Caviness v. Horizon
Comm. Learning Cent., Inc., 590 F.3d 806, 812 (9th Cir.
2010) (citation omitted).
of background, a multiemployer pension plan is one in which
multiple employers pool contributions into a single fund that
pays benefits to covered retirees who spent a certain amount
of time working for one or more of the contributing
employers. See Trustees of Local 138 Pension Tr. Fund v.
F.W. Honerkamp Co. Inc., 692 F.3d 127, 129 (2d Cir.
2012). The court in Honerkamp explained that plans
of this sort
offer important advantages to employers and employees alike.
For example, employers in certain unionized industries likely
would not create their own pension plans because the
frequency of companies going into and out of business, and of
employees transferring among employers, make single-employer
plans unfeasible. Multiemployer plans allow companies to
offer pension benefits to their employees notwithstanding
these practicalities, and at the same time to share the
financial costs and risks associated with the administration
of pension plans.
Id. (citing Concrete Pipe & Prods. of Cal.,
Inc. v. Constr. Laborers Pension Trust Fund for S.
Cal., 508 U.S. 602, 605-07 (1993)).
[a] key problem of ongoing multiemployer plans, especially in
declining industries, is the problem of employer withdrawal.
Employer withdrawals reduce a plan's contribution base.
This pushes the contribution rate for remaining employers to
higher and higher levels in order to fund past service
liabilities, including liabilities generated by employers no
longer participating in the plan, so-called inherited
liabilities. The rising costs may encourage-or force-further
withdrawals, thereby increasing the inherited liabilities to
be funded by an ever-decreasing contribution base. This
vicious downward spiral may continue until it is no longer
reasonable or possible for the pension plan to continue.
Id. (quoting Pension Benefit Guar. Corp. v. R.A.
Gray & Co., 467 U.S. 717, 722 n.2 (1984), in turn
quoting Pension Plan Termination Insurance Issues: Hearings
before the Subcommittee on Oversight of the House Committee
on Ways and Means, 95th Cong., 2nd Sess., 22 (1978)
(statement of Matthew M. Lind)) (internal quotation marks
Pension Protection Act of 2006 (PPA) was enacted in response
to the actual or forecasted termination of various large
pension plans and is aimed at stabilizing pension plans to
ensure they remain solvent. Id. at 130. In essence,
here Ely argues the Amended and Updated Rehabilitation Plan,
and specifically the AFD Exit Fee, is by design encouraging
employers to leave the Plan and forcing the remaining
participating employers to shoulder the ever-increasing
financial burden, thereby threatening his (and other
participants) vested future benefits. Each of Ely's
theories of recovery, set forth above, will be discussed in
Count I - 29 U.S.C. § 1451(a), ERISA §
specifically sets forth the parties who can bring certain
civil actions under the Act, and the type of actions each of
those parties may pursue. Cyr v. Reliance Std. Life Ins.
Co., 642 F.3d 1202, 1205 (9th Cir. 2011). Accordingly,
civil actions under ERISA are “limited only to those
parties and actions Congress specifically enumerated in [29
U.S.C. §] 1132.” Gulf Life Ins. Co. v.
Arnold, 809 F.2d 1520, 1524 (11th Cir. 1987). Ely
contends in Count I that he has a valid cause of action
pursuant to 29 U.S.C. § 1451(a)(1), ERISA §
4301(a)(1). This provision of ERISA authorizes a plan
participant, beneficiary, employer, or plan fiduciary to
bring an action when he or she is “adversely affected
by the act or omission of any party under this
subtitle.” 29 U.S.C. § 1451(a)(1). Ely asserts
that the imposition of the AFD Exit Fee violates 29 U.S.C.
§ 1391, ERISA § 4211, because it results in an
over-allocation of the plan's unfunded vested benefits,
and violates 29 U.S.C. § 1085(e)(3)(A)(ii), ERISA §
305(e)(3)(A)(ii), because its purpose is to delay, but not
prevent, insolvency of the Plan.
Board of Trustees argues that the Court of Appeals for the
Eleventh Circuit addressed the issue before the Court in
WestRock RKT Co. v. Pace Industry Union-Management
Pension Fund, 856 F.3d 1320, 1325 (11th Cir.
2017), and that the court's holding forecloses Ely's
cause of action under 29 U.S.C. § 1451(a). Because of
the plan's critical status, special funding rules
required the board of trustees for the pension plan to adopt
a rehabilitation plan for its fund. The rehabilitation plan
adopted by the board of trustees included a provision
requiring a withdrawing employer to pay a portion of the
fund's accumulated funding deficiency. WestRock, an
employer contributing to the Pace Industry Union-Management
Pension Fund, challenged the board of trustees' amendment
to the fund's rehabilitation plan under 29 U.S.C. §
1451(a), as Ely does here.
1451 is part of Subtitle E of ERISA, which contains special
provisions for multiemployer plans and has six parts, one of
which governs employer withdrawals. 856 F.3d at 1325. Part one
governing employer withdrawals sets forth how to calculate
“withdrawal liability”, which is the amount a
withdrawing employer is charged for its share of the unfunded
vested benefits. Id. (citing 29 U.S.C. §§
1381-1405 (governing the calculations for withdrawal
liability)). WestRock argued that, because Subtitle E of
ERISA governs withdrawal liability, it therefore encompassed
the exit fee imposed upon employers upon withdrawal. WestRock
asserted that the exit fee was an improper additional
liability not permitted by any section within Subtitle E of
court held that Section 1451(a) does not support the
employer's reading, because the employer was not
challenging an act or omission under Subtitle E of ERISA.
Id. at 1326. The board had adopted the amendment to
the rehabilitation plan implementing the exit fee under its
authority in 29 U.S.C. § 1085(a)(3)(A)(ii), ERISA §
305(a)(3)(A)(ii), which section is under Subtitle B of ERISA,
not under Subtitle E. Id. In other words, the court
explained, because the employer was not challenging an act or
omission under Subtitle E, the employer could not maintain a
cause of action under Section 1451(a). Id.
court noted that, under ERISA, its approach to statutory
interpretation is “measured and restrained.”
Id. (citing Gulf Life, 809 F.2d at 1524
(“[C]ivil actions under ERISA are limited only to those
parties and actions Congress specifically
enumerated….”)). Because there is nothing in the
text of ERISA indicating that Congress intended a remedy not
specifically enumerated, the court refused to recognize one
by implication. Id. Accordingly, the appellate court
upheld the district court's order granting the fund's
motion to dismiss, finding that ERISA does not provide a
cause of action under 29 U.S.C. § 1451(a) to an employer
to challenge an action taken by the board under 29 U.S.C.
§ 1085(a)(3)(A)(ii). Id.
controlling authority from the Court of Appeals for the Ninth
Circuit, the Court here finds the reasoning in
WestRock persuasive. The Board of Trustees implemented
the AFD Exit Fee pursuant to 29 U.S.C. §
1085(e)(3)(A)(ii), ERISA § 305(e)(3)(A)(ii), the
provision authorizing and mandating rehabilitation plans,
which is part of Subtitle B of ERISA. Accordingly, the
adoption or amendment of the rehabilitation plan is not an
act or omission of a party under Subtitle E, and cannot give
rise to a cause of action under 29 U.S.C. § 1451(a). The
Court finds no distinction between the fact that a
participant is suing here instead of an employer, given that
Section 1451(a) includes both employers and participants.
does Ely's argument that the AFD Exit Fee and the
imposition of statutorily required withdrawal liability are
“intertwined, ” and therefore the imposition of
the exit fee should be viewed as an act or omission under
Subtitle E of 29 U.S.C. § 1451(a)(1), have merit.
WestRock attempted a similar argument, asserting that any
liability imposed upon withdrawing employers was encompassed
by 29 U.S.C. §§ 1381-1405. The WestRock
court explained that the concept of withdrawal liability, and
its method of calculation set forth in 29 U.S.C. § 1391,
ERISA § 4211, is different than an accumulated funding
deficiency, which is defined in 29 U.S.C. § 1084(a),
ERISA § 304(a). WestRock 856 F.3d at 1325, and
n.6. Further, the court held that the exit fee was
implemented pursuant to the board of trustees' authority
in 29 U.S.C. § 1085(e)(3)(A)(ii), which is under
subtitle B of ERISA. Id. at 1326.
Ely's attempt to distinguish WestRock, which
considered the exit fee imposed upon employers withdrawing
from the Pace Industry Union-Management Pension Fund,
not one that matters for purposes of Ely's claim under 29
U.S.C. § 1451(a), ERISA § 4301(a)(1). The court in
WestRock determined that the structure of ERISA, and
its plain meaning, is such that there simply is no cause ...