Coats v. Kraft Foods, Inc.

• Decision Date: 17 June 1998
• Docket Number: Civil No. 1:97CV343.
• Citation: 12 F.Supp.2d 862
• Parties: Richard COATS, et al., Plaintiffs, v. KRAFT FOODS, INC. and Philip Morris Companies, Inc., Defendant.
• Court: U.S. District Court — Northern District of Indiana

12 F.Supp.2d 862

Richard COATS, et al., Plaintiffs, v. KRAFT FOODS, INC. and Philip Morris Companies, Inc., Defendant.

Civil No. 1:97CV343.

United States District Court, N.D. Indiana, Fort Wayne Division.

June 17, 1998.

COPYRIGHT MATERIAL OMITTED

Michael C. Kendall, Michael L. Schultz, Kendall Law Office, Indianapolis, IN, for Plaintiffs.

Brian L. McDermott, Charles B. Baldwin, Locke, Reynolds, Boyd and Weisell, Indianapolis, IN, James Fenton, Eilbacher Scott, Inc., Fort Wayne, IN, Burton L. Reiter, Chief Counsel, Kraft Foods, Inc., Northfield, IL, for Defendants.

ORDER

WILLIAM C. LEE, Chief Judge.

This matter is before the court on a motion to dismiss filed by the defendants on March 20, 1998. On May 1, 1998, the plaintiffs filed an amended complaint, and also filed their response to the defendants' motion to dismiss. The defendants filed their reply brief on May 26, 1998. For the following reasons, the defendants' motion to dismiss will be granted.

Motion to Dismiss Standard

In assessing the propriety of a motion to dismiss for failure to state a claim upon which relief can be granted pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, the well-pleaded factual allegations in the complaint and the inferences reasonably drawn from them are accepted as true. Baxter by Baxter v. Vigo County Sch. Corp., 26 F.3d 728, 730 (7th Cir.1994). Dismissal is appropriate if it appears beyond doubt that the plaintiffs can prove no set of facts consistent with the allegations in the complaint that would entitle them to relief. Hi-Lite Prods. Co. v. American Home Prods., Corp., 11 F.3d 1402, 1405 (7th Cir.1993). However, the court need not ignore facts set out in the complaint that undermine the plaintiffs' claims. Homeyer v. Stanley Tulchin Assoc., 91 F.3d 959, 961 (7th Cir.1996). Nor is the court required to accept the plaintiffs' legal conclusions. Reed v. City of Chicago, 77 F.3d 1049, 1051 (7th Cir.1996); Gray v. Dane County, 854 F.2d 179, 182 (7th Cir.1988).

Despite the liberality of modern rules of pleading, plaintiffs may not merely rest on bare legal conclusions. Rather, in order to resist a motion to dismiss they must set out facts sufficient to "outline or adumbrate" the basis for their ERISA claims. Panaras v. Liquid Carbonic Indus., Corp., 74 F.3d 786, 792 (7th Cir.1996); Perkins v. Silverstein, 939 F.2d 463, 466-67 (7th Cir.1991); Sutliff, Inc. v. Donovan Cos., Inc., 727 F.2d 648, 654 (7th Cir.1984); Strauss v. City of Chicago, 760 F.2d 765, 767-70 (7th Cir.1985).

The issue of whether a claim is timely filed under the applicable limitations period is particularly appropriate for consideration under a Rule 12(b)(6) dismissal where the claim is untimely based on the allegations contained in the complaint. Sandberg v. KPMG Peat, Marwick, LLP, 111 F.3d 331 (2d Cir.1997); Hinton v. Pacific Enterprises, 5 F.3d 391 (9th Cir.1993).

Discussion

In August 1995, the defendant Kraft Foods, Inc. ("Kraft"), formally announced the sale of its Kendallville facility to Favorite Brands International. The sale was formalized on or about September 25, 1995. On September 19, 1997, 252 individuals who worked for Kraft at the Kendallville facility filed this lawsuit. An amended complaint was filed on May 14, 1998.

In their amended complaint, the plaintiffs allege that Kraft (under the direction, influence, and control of Philip Morris) violated § 510 of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1140¹ by selling "the Kendallville facility in order to interfere with the full attainment of rights by the Plaintiffs in the qualified employee welfare benefit plans under which they were participants and beneficiaries²." The plaintiffs further allege that:

The determining motives in the decision of the Defendants to sell the Kendallville facility were: First, the imminent, resulting, increasing expense of providing health care to the growing number of older employees; and, Second, the impending liability of the Defendants to the employees for health and welfare and other employee benefits to which the Plaintiffs were entitled, or to which they would have become entitled, both in the near future and over the longer term.³

Plaintiffs originally alleged that the defendants violated § 502 of ERISA, and also requested compensatory and punitive damages and trial by jury. In their amended complaint, however, the plaintiffs have withdrawn these issues.

In support of their motion to dismiss, the defendants first argue that the plaintiffs' § 510 claims are time-barred. Section 510 of ERISA does not contain a limitations period. Thus, courts apply the state law limitation period most analogous to claims under § 510. Teumer v. General Motors Corp., 34 F.3d 542, 546-47 (7th Cir. 1994). In Indiana, a two-year limitations period applies to plaintiffs' claims under § 510 of ERISA. Bollenbacher v. Helena Chemical Co., 934 F.Supp. 1015, 1031 (N.D.Ind.1996); Ahnert v. Delco Electronics Corp., 982 F.Supp. 1320 (S.D.Ind.1997).

The plaintiffs do not dispute that they failed to file their § 510 claims within two years of the date they were advised of the sale of the Kendallville plant. That is, the plaintiffs knew of the sale as early as August 1995, but did not file suit until September of 1997. Yet, the plaintiffs argue that their claims are not untimely because the discovery rule and/or equitable estoppel may apply.

Under the discovery rule, the statute of limitations does not start to run until the plaintiffs "discover" that they have been injured. Cada v. Baxter Healthcare Corp., 920 F.2d 446, 450 (7th Cir.1990); see also Soignier v. American Bd. of Plastic Surgery, 92 F.3d 547, 551-52 (7th Cir.1996). The plaintiffs argue that the "injury" they suffered was not the sale of the Kendallville facility, but rather the "loss of certain benefits" in unidentified employee benefit plans and that the limitations period did not commence until they learned of this "injury".

As the defendants point out, however, plaintiffs' argument has been rejected by the Seventh Circuit Court of Appeals, as well as by the United States Supreme Court. That is, in employment discrimination cases, the injury arises when the adverse employment action is communicated to the plaintiff, not when the ill effects of the decision are felt by the plaintiff. Accrual is not delayed until the employees' discovery of the alleged unlawful nature of the decision. Delaware State College v. Ricks, 449 U.S. 250, 260, 101 S.Ct. 498, 66 L.Ed.2d 431 (1980). As the Seventh Circuit stated in Cada:

The discovery rule is implicit in the holding of Ricks that the statute of limitations began to run "at the time the tenure decision was made and communicated to Ricks."

* * * * * *

The only string left on Cada's bow is the discovery rule, which pushes back the limitations period. The rule is not applicable here.... Ricks establishes that it is the date of firing or other adverse personnel action, not the date on which the action takes effect and the plaintiff is terminated, that — provided it is communicated to the employee, and it was here — is the date of accrual.... His suit was time-barred.

Cada, 920 F.2d at 450, 453. Likewise, this court in Bollenbacher v. Helena Chemical Company, 934 F.Supp. 1015, 1031 (N.D.Ind. 1996), stated:

In Teumer, the Seventh Circuit expressly rejected the Plaintiff's argument that his § 510 cause of action did not accrue until "he ascertained the alleged nature of the layoff." Teumer, 34 F.3d at 550.

Bollenbacher, 934 F.Supp. at 1031 (holding that plaintiffs § 510 cause of action accrued when the employer told him that he was being laid off).

The Seventh Circuit has squarely rejected the argument that a § 510 claim accrues when the employees learn of the loss of benefits. In Tolle v. Carroll Touch, Inc., 977 F.2d 1129 (7th Cir.1992), the plaintiff argued that the limitations period applicable to § 510 did not accrue in September 1984 when she learned of her employment termination, but rather later when she learned her benefits were denied. The Seventh Circuit rejected Tolle's argument and concluded that her § 510 claim accrued when the termination decision was communicated to Tolle:

Because the purpose of Section 510, like intentional employment discrimination cases, is to prevent actions taken for an unlawful purpose, it is the decision and the participant's [knowledge] of this decision that dictates accrual. This means that Tolle's claim accrued when CTI made and communicated this decision to Tolle.

Id. at 1141-42 (citing and applying Ricks and Cada).

In a similar case, Thelen v. Marc's Big Boy Corp., 64 F.3d 264, 267 (7th Cir.1995), the Seventh Circuit distinguished the discovery rule from equitable tolling and estoppel. In Thelen, the plaintiff argued that the limitations period commenced not when he learned of his termination, but rather when he learned how old his replacement was. The Seventh Circuit disagreed:

Thelen has confused the discovery rule with the doctrines of equitable tolling and estoppel. A plaintiff's action accrues when he discovers that he has been injured, not when he determines that the injury was unlawful. See, e.g., Teumer v. General Motors Corp., 34 F.3d 542, 550 (7th Cir. 1994) ("Teumer presents a meritless argument that the claim did not accrue until he first discovered the information from which he ascertained the alleged unlawful nature of the layoff. As GM rightly points out, such a contention has nothing to do with accrual; Teumer is really insisting that the limitations clock should be equitably tolled for the time in which he was unable to determine that his injury (of which he was unaware) — the layoff — was due to wrongdoing."); Moskowitz v. Trustees of Purdue Univ., 5 F.3d 279, 281 (7th Cir.1993) (parenthetical omitted); Cada v. Baxter Healthcare Corp., 920 F.2d 446, 451 (7th Cir.1990) (quote omitted).

Thelen, 64 F.3d at 267. Thus, the Seventh Circuit held that the...