Digeronimo Aggregates, LLC v. Zemla

• Citation: 763 F.3d 506
• Decision Date: 14 August 2014
• Docket Number: No. 13–4389.,13–4389.
• Parties: DiGERONIMO AGGREGATES, LLC, Plaintiff–Appellant, v. Michael H. ZEMLA; Steven M. Eisenberg; Jack W. Sideris; Nick C. Sideris; Kevin Schroeder; James G. Stiegel; Thomas Tyrrell, Defendants–Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)

763 F.3d 506

DiGERONIMO AGGREGATES, LLC, Plaintiff–Appellant,

v.Michael H. ZEMLA; Steven M. Eisenberg; Jack W. Sideris; Nick C. Sideris; Kevin Schroeder; James G. Stiegel; Thomas Tyrrell, Defendants–Appellees.

No. 13–4389.

United States Court of Appeals, Sixth Circuit.

Argued: June 25, 2014.

Decided and Filed: Aug. 14, 2014.

ARGUED:Shaylor R. Steele, Benesch Friedlander, Coplan & Aronoff LLP, Cleveland, Ohio, for Appellant. Heather M. Kern, McDonald Hopkins LLC, Cleveland, Ohio, for Appellees. ON BRIEF:Shaylor R. Steele, Thomas O. Crist, Patrick J. Egan, Benesch Friedlander, Coplan & Aronoff LLP, Cleveland, Ohio, for Appellant. Heather M. Kern, Dan L. Makee, McDonald Hopkins LLC, Cleveland, Ohio, for Appellees.

Before: GRIFFIN and DONALD, Circuit Judges; and GRAHAM, District Judge.^*

OPINION

GRIFFIN, Circuit Judge.

Plaintiff, an employer who contributes to a multiemployer pension plan governed by the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. §§ 1001–1461, filed a complaint against defendants, trustees of that plan, alleging that they negligently managed the plan, causing plaintiff to suffer an increased withdrawal liability when a majority of contributing employers withdrew from the plan. The district court granted defendants' Rule 12(b)(6) motion to dismiss, holding that there was no substantive basis for plaintiff's negligence claim in any section of ERISA or under the federal common law. We agree and affirm.

I.

Plaintiff DiGeronimo Aggregates, LLC, and a number of other employers, contributed to the Teamsters Local Union No. 293 Pension Plan (“Plan”). ¹ Defendants Michael H. Zemla, Jack W. Sideris, Nick C. Sideris, Thomas Tyrrell, Steven M. Eisenberg, Kevin Schroeder, and James G. Stiegel, are trustees of the Plan. Defendants managed the Plan, including negotiating and ratifying contribution rates and overseeing the Plan's investments and expenses.

Defendants terminated the Plan in December 2009 because substantially all of the Plan's contributing employers withdrew from paying contributions. Consequently, defendants assessed $1,755,733 in “withdrawal liability” to plaintiff, which represents plaintiff's share of the $49,000,000 in unfunded, vested benefits that the contributing employers owed the Plan.

In May 2013, plaintiff sued defendants under 29 U.S.C. § 1451(a), alleging that defendants negligently managed the Plan's assets, causing plaintiff harm in the form of an increased withdrawal liability.² Defendantsfiled a motion to dismiss under Rule 12(b)(6), arguing that plaintiff failed to state a viable claim for relief because § 1451(a) confers no substantive rights. Plaintiff responded by recognizing that § 1451(a) is a standing provision only, and agreeing that the section does not—by itself—provide a legal basis for a negligence cause of action. However, plaintiff urged the district court to exercise its limited law-making authority under the federal common law of ERISA pension plans and recognize a new legal basis for its negligence claim. The court declined plaintiff's invitation and granted defendants' motion. Plaintiff timely appealed.

II.

“We review de novo a district court's order to dismiss a claim under Federal Rule of Civil Procedure 12(b)(6). In doing so, we accept all well-pled allegations as true and determine whether they plausibly state a claim for relief.” Glazer v. Chase Home Fin. LLC, 704 F.3d 453, 457 (6th Cir.2013). To survive a Rule 12(b)(6) motion to dismiss, “[t]he complaint must [ ] contain either direct or inferential allegations respecting all material elements to sustain a recovery under some viable legal theory.” Handy–Clay v. City of Memphis, Tenn., 695 F.3d 531, 538 (6th Cir.2012) (internal quotation marks and citation omitted).

III.

The parties dispute whether plaintiff has a cause of action under the federal common law of ERISA pension plans against defendants for harm caused by defendants' alleged negligent plan management. We hold that plaintiff has no cause of action.

A brief review of the statutory scheme governing multiemployer pension plans provides context. Congress enacted ERISA to ensure that “if a worker has been promised a defined pension benefit upon retirement—and if he has fulfilled whatever conditions are required to obtain a vested benefit—he actually will receive it.” Nachman Corp. v. Pension Benefit Guar. Corp., 446 U.S. 359, 375, 100 S.Ct. 1723, 64 L.Ed.2d 354 (1980). ERISA also created the Pension Benefit Guaranty Corporation (“PBGC”) to administer a newly-formed pension plan termination insurance program. 29 U.S.C. § 1302. Under that program, PBGC would collect insurance premiums from covered pension plans and provide benefits to participants in those plans if their plans terminate with insufficient assets to support the guaranteed benefits. Pension Benefit Guar. Corp. v. R.A. Gray & Co., 467 U.S. 717, 720, 104 S.Ct. 2709, 81 L.Ed.2d 601 (1984).

However, it soon became apparent that the PBGC would be overwhelmed by obligations in excess of its capacity because a significant number of multiemployer plans were experiencing extreme financial hardship. Id. at 721, 104 S.Ct. 2709. In response, Congress directed the PBGC to prepare a report analyzing the issue and recommending appropriate legislative action. Id. at 721–22, 104 S.Ct. 2709. The PBGC found, among other things, that ERISA failed to address the adverse consequences that occurred when an employer withdrew from a multiemployer pension plan:

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.... 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. at 722 n. 2, 104 S.Ct. 2709 (internal quotation marks and citation omitted). Consequently, the PBGC proposed rules under which a withdrawing employer would be required “to pay whatever share of the plan's unfunded vested liabilities was attributable to that employer's participation.” Id. at 723, 104 S.Ct. 2709. Based upon the PBGC's recommendations, Congress enacted the Multiemployer Pension Plan Amendment Act (“MPPAA”). See29 U.S.C. §§ 1381–1461.

Relevant here, the MPPAA provides that if an employer withdraws from a multiemployer fund, it must make a payment of “withdrawal liability,” which is calculated as the employer's proportionate share of the fund's “unfunded vested benefits[.]” 29 U.S.C. § 1381(b)(1). The MPPAA provides that once a fund determines that an employer has withdrawn from its plan, the fund must notify the employer of the amount of the liability, prepare a schedule for liability payments, and demand payment in accordance with the schedule. Id. §§ 1382, 1399(b)(1).

In this case, because nearly all of the contributing employers voted to withdraw and terminate the Plan, defendants assessed plaintiff with $1,755,733 in “withdrawal liability.” Plaintiff does not challenge an assessment of liability or defendants' mathematical calculation. Rather, plaintiff contends that defendants negligently managed the Plan, primarily by ratifying contribution rates that were insufficient to support the benefits owed by the Plan, and in doing so, directly caused a large portion of the $1,755,733 withdrawal liability. Plaintiff relies upon the federal common law of ERISA pension plans for creating a negligence cause of action against the Plan's trustees and argues 29 U.S.C. § 1451(a)(1) provides it with standing to assert such a claim in federal district court. We address each point, beginning with statutory standing.

The parties apparently agree that plaintiff has statutory standing. See Roberts v. Hamer, 655 F.3d 578, 580 (6th Cir.2011) (distinct from Article III standing, statutory standing asks “whether this plaintiff has a cause of action under [a particular] statute” (citation omitted)). Section 1451(a)(1) provides that an “employer ... who is adversely affected by the act or omission of any party under this subtitle with respect to a multiemployer plan ... may bring an action for appropriate legal or equitable relief, or both.” The statute is satisfied here because plaintiff is an employer who has been adversely affected by the action of defendants, who are trustees of a multiemployer plan. The parties also agree that § 1451(a)(1) confers no substantive rights but simply identifies who can pursue a civil action to enforce the sections governing multiemployer plans. See Bay Area Laundry & Dry Cleaning Pension Trust Fund v. Ferbar Corp., 522 U.S. 192, 203, 118 S.Ct. 542, 139 L.Ed.2d 553 (1997) (noting that § 1451(a)(1) addresses only “ who may sue for a violation of the obligations established by the Act's substantive provisions”). The parties' agreements end here as they dispute the legal viability of plaintiff's negligence claim.

Acknowledging that such a negligence claim is not authorized by any section of ERISA, plaintiff urges us to utilize our lawmaking powers under the federal common law to create a new negligence claim in favor of contributing employers. At the time of ERISA's enactment, Congress in general encouraged the courts to develop a federal common law of employee benefits because many issues relating to employee benefits would arise where there would be no specific rule to govern the question. See Franchise Tax Bd. v. Constr. Laborers Vacation Trust, 463 U.S. 1, 24 n. 26, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983). However, the Supreme Court has recognized that the creation of federal common law is a “necessary expedient” under these conditions and an “unusual exercise of lawmaking[,]” which should only be indulged “in a few and restricted instances.” Milwaukee v....