Cook v. Campbell, Civil Action No. 2:01cv1425-ID.

Decision Date30 March 2007
Docket NumberCivil Action No. 2:01cv1425-ID.
Citation482 F.Supp.2d 1341
PartiesBinita L. COOK, et al., Plaintiffs, v. Boyd F. CAMPBELL, et al., Defendants.
CourtU.S. District Court — Middle District of Alabama

Leah Oldacre Taylor, Taylor & Taylor, Birmingham, AL, for Plaintiffs.

H. Douglas Hinson, Patrick C. Dicarlo, Alston & Bird, LLP, Atlanta, GA, Ronald G. Davenport, Rushton Stakely Johnston & Garrett PC, Montgomery, AL, for Defendants.


De MENT, Senior District Judge.


Plaintiffs in this litigation are former employees of Central Alabama Home Health Services, Inc. ("Central Alabama"), who during their employment participated in Central Alabama's employee stock ownership plan ("ESOP"). Plaintiffs claim that, through deceptive tactics, they were persuaded to voluntarily terminate their employment in order to participate in Central Alabama's career transition assistance plan ("CTAP"), a plan which Central Alabama implemented as an alternative to laying off employees. The deceptive tactics included an alleged scheme involving the sale of overvalued Central Alabama stock to the ESOP and, relatedly, alleged false representations concerning the value of Plaintiffs' vested shares of ESOP stock which Plaintiffs would receive as a lumpsum payment pursuant to their CTAP election. Asserting various breaches of fiduciaries duties and fraudulent conduct by the ESOP trustee, who is Defendant Boyd Campbell ("Campbell"), Plaintiffs allege violations of state law, the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961-1968, and the Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1000-1461 ("ERISA").

Pending before the court is Campbell's motion for judgment on the pleadings. (Doc. No. 37.) Therein, Campbell alleges, among other grounds, that Plaintiffs do not have standing to bring a RICO claim, that Plaintiffs impermissibly attempt to revive state-law claims which this court previously dismissed as preempted by ERISA, and that there is no provision under ERISA which would allow Plaintiffs, in their individual capacities, to hold Campbell personally liable for legal relief. After careful consideration of the arguments of counsel and the applicable law, the court finds that Campbell's motion is due to be granted in part and denied in part.


The court exercises subject matter jurisdiction over this case pursuant to 28 U.S.C. § 1331 (federal question). The parties do not contest personal jurisdiction or venue, and the court finds adequate allegations of both.


Judgment on the pleadings pursuant to Rule 12(c) of the Federal Rules of Civil Procedure is appropriate when "no issues of material fact exist, and the movant is entitled to judgment as a matter of law." Ortega v. Christian, 85 F.3d 1521, 1524-25 (11th Cir.1996). When reviewing a judgment on the pleadings, the court must accept the facts in the complaint as true and view them in the light most favorable to the nonmoving party. Id. A judgment on the pleadings is limited to consideration of "the substance of the pleadings and any judicially noticed facts." Bankers Ins. Co. v. Fla. Residential Prop. & Cas. Joint Underwriting Ass'n, 137 F.3d 1293, 1295 (11th Cir.1998). "If upon reviewing the pleadings it is clear that the plaintiff would not be entitled to relief under any set of facts that could be proved consistent with the allegations, the court should dismiss the complaint." Horsley v. Rivera, 292 F.3d 695, 700 (11th Cir.2002).


In October 2001, Plaintiffs filed a multicount complaint against Central Alabama and Campbell in the Circuit Court of Montgomery County, Alabama.1 In their state-court complaint, Plaintiffs asserted claims against Central Alabama and against Campbell, individually and as trustee of the ESOP, alleging violations of RICO and state law (including fraud, civil conspiracy, breach of contract, conversion, and securities violations). (Compl.(Doc. No. 1).) Central Alabama and Campbell timely removed the case to the United States District Court for the Middle District of Alabama on the basis of federal question jurisdiction, namely, ERISA preemption and RICO. (Not. of Removal (Doc. No. 1).)

In January 2002, Plaintiffs moved the court to remand this lawsuit to state court (Doc. No. 8), but the court denied the motion on the ground that the complaint expressly stated a RICO claim over which the court properly exercised federal question jurisdiction. (Doc. No. 14.) In July 2002, Plaintiffs unsuccessfully tried again to persuade the court to remand this lawsuit by requesting dismissal of their RICO claim (Doc. No. 16); however, the court found that the ESOP and CTAP were employee welfare benefits plans governed by ERISA and that, consequently, ERISA preempted. Plaintiffs' state-law claims. (Doc. No. 19.) The court rejected Plaintiffs' argument that the CTAP provided few benefits beyond a lump-sum payment, thus, requiring none of the ongoing administration generally involved in ERISA plans. (Id. at 2-3.) The court explained:

The court accepts as true that Plaintiffs were participants in Defendants' ESOP plan, and that, upon notification that they were to be laid off, elected to receive benefits pursuant to Defendants' CTAP plan. In effect, then, the CTAP plan was a mechanism to provide severance payments already due under the ESOP plan. The Supreme Court has held that "a one-time, lump-sum payment triggered by a single event requires no administrative scheme" of the type envisioned by Congress when enacting ERISA. Ft. Halifax Packing Co. v. Coyne, 482 U.S. 1, 12, 107 S.Ct. 2211, 96 L.Ed.2d 1 (1987). In the present case, however, Defendants did not establish the plan to protect its employees' interest in the event of some "contingency that may never materialize." Id. Rather, the CTAP was established to provide employees with sustained benefits in the face of a certain event.

More significant, however, is the intimate interrelationship between the ESOP plan and the CTAP plan, particularly in light of Plaintiffs' claims. While Plaintiffs were due certain benefits pursuant to the CTAP, these were benefits that had already accrued under the ESOP. (Resp. Ex. 3 at 2.) The allegations in the Complaint, in turn, relate directly to management of the ESOP funds. (Compl. ¶¶ 16-24, 27-30.) Indeed, the allegations of fraud and fiduciary mismanagement appear to refer to actions which took place prior to Plaintiffs' election to pursue the CTAP option. (Id.) Plaintiffs rightly have not disputed that the ESOP is governed by ERISA. See 29 U.S.C. 1107(d)(6). However, they have not persuaded the court why ERISA applies to the ESOP yet it should not likewise apply to the mechanism by which ESOP benefits were distributed. ERISA was enacted to provide uniform standards to which employers must adhere in the administration of employee benefits; this, purpose is defeated when different plans are subjected to a "patchwork scheme of regulation." Ft. Halifax, 482 U.S. at 11, 107 S.Ct. 2211. The court finds that Plaintiffs' allegations pertain to the ESOP as much as they do to the CTAP. Each claim arising under Alabama law is akin to relief available under ERISA, so the court finds that such claims are preempted.

(Id. at 3-4.)

Based upon ERISA preemption, which also conferred federal question jurisdiction, the court denied the motion to remand and left in place the RICO claim, "see[ing] no reason" to dismiss the claim on the ground asserted by Plaintiffs. (Id. at 2, 4.) The court, therefore, directed Plaintiffs to file an amended complaint to allege recovery under ERISA. (Id. at 4.)

On September 3, 2002, Plaintiffs filed an amendment to their original complaint. (1st Am. Compl. (Doc. No. 21).) Rather than converting the state law claims to ERISA claims, as directed by the court Plaintiffs reasserted their state law claims and added eight additional ERISA counts, stating as follows: "Plaintiffs do not intend to waive any of their original causes of action under state law which were pled in their Complaint filed in the Circuit Court of Montgomery County, Alabama." (Id. at 1.)

On August 30, 2002, Central Alabama notified the court that, on August 23, 2002, it filed a Chapter 11 bankruptcy petition. As a result, the court stayed this action during the pendency of Central Alabama's bankruptcy proceedings. (Doc. Nos. 22, 27.) The stay was lifted on August 25, 2005. (Doc. No. 27.)

Subsequently, Central Alabama and Campbell filed a joint motion for summary judgment which related solely to the bankruptcy discharge issue. The summary judgment filing was followed by a motion for judgment on the pleadings submitted by Campbell. (Doc. Nos. 35, 41.) Plaintiffs did not oppose the entry of summary in Central Alabama's favor because they agreed that all of Plaintiffs' claims against Central Alabama were discharged pursuant to the confirmation order entered in the Chapter 11 bankruptcy proceedings. Plaintiffs, however, did challenge the motion for summary judgment as it related to Campbell. The court denied the motion for summary judgment as premature on the claims asserted against Campbell, concluding that there had been inadequate time for discovery due to the stay entered during the pendency of Central Alabama's bankruptcy proceedings. Pending is Campbell's motion for judgment on the pleadings. (Doc. No. 41.)


As alleged in the complaint, as amended, the facts are as follows2 In 1993, Central Alabama adopted an employee stock ownership plan ("ESOP") and created a trust to which Central Alabama agreed to make annual contributions in the form of cash and Central Alabama stock. (Compl. at 4 (¶ 16) (Doc. No. 1).) The primary purpose of the ESOP, as represented to Central Alabama employees, was to enable participating employees to share in the growth and prosperity of...

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