Elbeco Inc. v. Nat'l Ret. Fund

• Decision Date: 02 September 2015
• Docket Number: No. 5:15–cv–00318–JFL,5:15–cv–00318–JFL
• Citation: 128 F.Supp.3d 849
• Parties: Elbeco Incorporated, Plaintiff, v. National Retirement Fund, Defendant.
• Court: U.S. District Court — Eastern District of Pennsylvania

128 F.Supp.3d 849

Elbeco Incorporated, Plaintiff,

v.National Retirement Fund, Defendant.

No. 5:15–cv–00318–JFL

United States District Court, E.D. Pennsylvania.

Signed September 2, 2015

Douglas M. Lurio, Margaret Sherry Lurio, Lurio & Assoc., P.C., Philadelphia, PA, for Plaintiff.

Ronald E. Richman, Taleah Jennings, Schulte Roth & Zabel, LLP, New York, NY, Malcolm J. Gross, Samuel Ezra Cohen, Gross, McGinley, LLP, Allentown, PA, for Defendant.

MEMORANDUM OPINION

Defendant's Motion to Dismiss, ECF No. 13—Granted

Joseph F. Leeson, Jr.

, United States District Judge

I. Introduction

This matter comes before the Court upon consideration of Defendant National Retirement Fund's Motion to Dismiss Plaintiff Elbeco Incorporated's Complaint. ECF No. 13. For the reasons that follow, the Court will grant the Motion and will dismiss the Complaint without prejudice.

II. Factual Background and Procedural History

Plaintiff Elbeco Incorporated is a Pennsylvania corporation engaged in the uniform manufacturing business.¹ Compl. ¶ 3. Plaintiff's president is David Lurio. Compl. ¶ 12. Defendant National Retirement Fund ("Defendant" or "the Fund") is a multiemployer pension fund plan under the Employee Retirement Income Security Act of 1974 ("ERISA"). Compl. ¶ 4. Plaintiff employs members of two Joint Boards of the Workers United labor union: the Mid–Atlantic Regional Joint Board and the Chicago and Midwest Regional Joint Board (collectively, "the Union"). Compl. ¶ 5. Noel Beasley is the President of Workers United and both a trustee and the secretary of the Fund. Compl. ¶¶ 13–14. Harold Bock is the International Vice President of the Mid–Atlantic Regional Joint Board of Workers United and is also a trustee of the Fund. Compl. ¶¶ 13, 15. Together, they served as the Union's "chief spokesmen" during the Union's 2013–2014 negotiations with Plaintiff concerning a new collective bargaining agreement ("CBA"). Compl. ¶ 13.

Plaintiff began contributing to the Fund (including its predecessors) in 1972. Compl. ¶ 9. In November 2012, Plaintiff asked the Fund to provide it with an estimate of its withdrawal liability pursuant to the Multiemployer Pension Plan Amendments Act ("MPPAA").² Compl. ¶ 16. In January 2013, Defendant provided an estimate of $1,024,718. Compl. ¶ 18. In May 2013, Plaintiff requested an updated estimate of withdrawal liability; in July 2013, Defendant provided an estimate of $1,003,203. Compl. ¶ 19. "As part of [Plaintiff's] negotiations with the Union, [Plaintiff] ... advised [Beasley and Bock] that [Plaintiff] was planning a complete withdrawal from the Fund pending and subject to collective bargaining." Compl. ¶ 13. Defendant, "and specifically Bock and Beasley, knew at least by October 2013 that the Fund was changing actuarial firms and/or its actuarial assumptions, and that the withdrawal liability assessments against [Plaintiff] would increase greatly for a withdrawal after 2013." Compl. ¶ 21. If the Fund "had timely notified Plaintiff in 2013 that the Fund was changing actuarial firms and/or its actuarial assumptions for withdrawals after 2013," or that "the withdrawal liability assessments would increase for withdrawals after 2013," then Plaintiff "would have withdrawn from the Fund by December 31,2013." Compl. ¶ 23–24. However, Plaintiff "was not able to accomplish the withdrawal during 2013 as a result of intentional delaying actions" by Beasley and Bock with respect to the CBA negotiations. Compl. ¶ 25.

By letter dated January 13, 2014, Plaintiff requested another withdrawal liability estimate. Compl. ¶ 31. In March 2014, while awaiting the estimate results, Plaintiff forwarded to Bock and Beasley a proposed Memorandum of Understanding ("MOU") as part of the ongoing negotiations for a new CBA. Compl. ¶ 33. The MOU provided that Plaintiff "will no longer make contributions to the present National Retirement Pension Fund. The foregoing shall be subject to [Plaintiff's] receipt and approval of the amount of withdrawal liability proposed to be assessed by the Fund." Compl. ¶ 33. After receiving the proposed MOU, Beasley proposed to Lurio that Plaintiff remove the second sentence from the above-quoted language. Compl. ¶ 34. Beasley stated that Plaintiff should wait to receive the updated estimate of withdrawal liability before entering into the MOU and that if Plaintiff was satisfied with the updated estimate, then the parties could enter into the MOU. Compl. ¶¶ 35–36. Plaintiff agreed to Beasley's suggestion and advised Defendant's representative, David C. Sapp, "that per Beasley's suggested approach to resolving the withdrawal liability issue, as a condition to settling the negotiations for a new CBA, [Plaintiff] was now waiting to receive the updated estimate from the Fund prior to entering into the MOU and withdrawing from the Fund." Compl. ¶ 37.

On April 8, 2014, the Fund provided Plaintiff with an updated estimate of $913,970. Compl. ¶ 40. The following day, Plaintiff signed a revised MOU and forwarded it to Bock and Beasley; the revised MOU provided that Plaintiff would withdraw from the Fund following ratification of the MOU by Plaintiff's union facilities. Compl. ¶¶ 43–44. By early May 2014, the final MOU was ratified by each of Plaintiff's union facilities and signed by Beasley and Bock. Compl. ¶ 47. On May 20, 2014, Sapp called Lurio and advised him that the Fund had changed its interest rate assumption from 7.5% to 3%. Compl. ¶ 50. This was "the first time that [Plaintiff] was given notice of the Fund's decision to change the interest rate assumption, change in actuary, or even that such a change was being considered by the Fund." Compl. ¶ 51. On June 9, 2014, Sapp wrote to Plaintiff, stating that Defendant had determined that Plaintiff incurred a complete withdrawal from the Fund effective June 1, 2014, and that the estimated withdrawal liability assessment was $3,027,697. Compl. ¶ 52. At that point, Plaintiff "was not able to change concessions it had made to the Union in connection with the Final MOU that was ratified by the Union," and it was not able to rescind its decision to withdraw from the Fund. Compl. ¶ 54; Pl.'s Mem. Supp. Resp. Def.'s Mot. 4, ECF No. 16–1. Plaintiff alleges, upon information and belief, that the Fund "made the decision to change its actuary in 2013" and "was aware of the change or anticipated change in interest rate assumptions for the Fund at least prior to the date of [Plaintiff's] and the Union's agreement to the Final MOU which included withdrawal from the Fund." Compl. ¶¶ 57–58.

In January 2015, Plaintiff filed the present Complaint, alleging counts of fraud, negligent misrepresentation, and equitable estoppel under federal common law and seeking declaratory and monetary relief against the Fund. Compl. ¶¶ 64–93. With respect to each of the counts, Plaintiff alleges that "[t]he Fund's representatives, including Bock, Beasley and Sapp, intentionally and fraudulently withheld information from [Plaintiff] insofar as they failed to advise [Plaintiff] that the Fund was contemplating and/or changing actuarial firms and its actuarial assumptions in 2014, and failed to advise [Plaintiff] that the withdrawal liability assessments would increase for withdrawals after 2013." Compl. ¶ 65. Further, Plaintiff alleges that Defendant "had a duty to timely disclose to [Plaintiff] that the Fund was contemplating changes, including its actuary and actuarial assumptions, and a duty to timely disclose to [Plaintiff] that it had changed actuaries and actuarial assumptions." Compl. ¶ 66. According to Plaintiff, the Fund "knew that a delay of [Plaintiff's] withdrawal from the Fund until 2014 would greatly increase [Plaintiff's] withdrawal liability," and the Fund's "failure to timely advise [Plaintiff] of the contemplated change, and the change, in actuaries and actuarial assumptions was material to [Plaintiff's] decision to not withdraw from the Fund in 2013." Compl. ¶ 68–69. Plaintiff "relied to its detriment on the Fund's omissions, statements and actions insofar as [Plaintiff] did not withdraw from the Fund until 2014, thereby greatly increasing its withdrawal liability." Compl. ¶ 70. Moreover, "[i]n 2014, the Fund knew that [Plaintiff] was relying on the Fund's withdrawal liability estimates when [Plaintiff] agreed to the Final MOU with the Union and withdrawal from the Fund in 2014." Compl. ¶ 72.

Further, Plaintiff alleges that "[t]he Fund made a material misrepresentation to [Plaintiff] when the Fund advised [Plaintiff] on April 8, 2014, that the estimated withdrawal liability ... was $913,970, since the Fund failed to disclose to [Plaintiff] the change in the Fund actuary and the change in its assumptions for calculating withdrawal liability." Compl. ¶ 74. Plaintiff alleges that "at the time the Fund advised [Plaintiff] on April 8, 2014, that the estimated withdrawal liability for [Plaintiff] was $913,970, the Fund knew about the change in the Fund actuary, the change in its assumptions for calculating withdrawal liability, and that the withdrawal liability would be greatly in excess of $913,970." Compl. ¶ 75. Plaintiff "relied to its detriment on the Fund's statements and omissions insofar as if [Plaintiff] had known about the change in actuaries and actuarial assumptions, [it] would have not withdrawn from the Fund in 2014, or agreed to the final MOU." Compl. ¶ 77.

In light of the above allegations, Plaintiff seeks a declaration that the amount of its withdrawal liability is $913,970, which is the figure cited in the April 2014 withdrawal liability estimate. Compl. ¶ 89. Concurrently with the present action, and pursuant to the MPPAA, Plaintiff has also initiated arbitration with the American Arbitration Association regarding the withdrawal liability assessment. Compl. ¶ 61. Plaintiff has requested that the arbitration be stayed pending this court action and contends that "[t]his court, and not the arbitrator, should decide the federal common law claims asserted in this complaint."³ Compl. ¶ 62.

On ...