Hastings v. Wilson

• Decision Date: 22 February 2008
• Docket Number: No. 07-1611.,07-1611.
• Citation: 516 F.3d 1055
• Parties: Neil HASTINGS; Jennifer Karpiuk, individually and on behalf of all others similarly situated, Appellants, v. Gary L. WILSON; John H. Dasburg; Steve Wilson; Douglas Steenland; Richard H. Anderson; Terri L. Keimig; Timothy J. Meginnes; Daniel Matthews; Michael Becker; Robert Brodin; Mickey P. Foret; Hiram Cox; Thomas Momchilov; James G. Mathews; Bernard L. Han; Steve Miller; Tom Goebel; Bill Johnston; Len Willey; Rick Woolley; Jim MacKenzie; Unknown Fiduciaries 1-100, Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

516 F.3d 1055

Neil HASTINGS; Jennifer Karpiuk, individually and on behalf of all others similarly situated, Appellants, v. Gary L. WILSON; John H. Dasburg; Steve Wilson; Douglas Steenland; Richard H. Anderson; Terri L. Keimig; Timothy J. Meginnes; Daniel Matthews; Michael Becker; Robert Brodin; Mickey P. Foret; Hiram Cox; Thomas Momchilov; James G. Mathews; Bernard L. Han; Steve Miller; Tom Goebel; Bill Johnston; Len Willey; Rick Woolley; Jim MacKenzie; Unknown Fiduciaries 1-100, Appellees.

No. 07-1611.

United States Court of Appeals, Eighth Circuit.

Submitted: November 14, 2007.

Filed: February 22, 2008.

Gerald D. Wells, III, argued, Radnoe, PA, Joseph H. Meltzer, Edward W. Ciolko; Robert I. Harwood and Samuel K. Rosen,

New York, NY, Vernon J. Vander and Thomas V. Siefert, Minneapolis, MN, on the brief, for Appellant.

Stephen P. Lucke, argued, Minneapolis, MN, Thomas Tinkham, Christopher J. Rillo. and Thomas S. Gigot, Washington, DC, on the brief, for Appellees, Steve Miller, Richard H. Anderson, Gary L. Wilson, John H. Dasburg, Steve Wilson, Douglas Steenland, Terri L. Keimig, Timothy J. Meginnes, Daniel Mathews, Michael Becker Robert Brodin, Mickey P. Foret, Hiram Cox, Thomas Momchilov, James G. Mathews, and Bernard L. Han.

Robert W. Rachal, argued, New Orleans, LA, Howard Shapiro, Stacey Cerrone, Barbara Jean D'Qquila and Cynthia A. Bremer, Minneapolis, MN, on the brief, for Appellees, Steve Miller, Steve Wilson, Tom Goebel, Bill Johnston, Len Willey, Rick Wolley, and Jim MacKenzie.

Before MURPHY, HANSEN and GRUENDER, Circuit Judges.

GRUENDER, Circuit Judge.

Neil Hastings and Jennifer Karpiuk were employees of Northwest Airlines, Inc. ("NWA"). They brought a class action lawsuit against alleged fiduciaries of two separate NWA pension plans claiming the defendants breached their fiduciary duties under §§ 409 and 502(a)(2) of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1109, 1132(a)(2). The district court¹ dismissed the action with respect to one of the pension plans, concluding that the Railway Labor Act's ("RLA") mandatory arbitration provision, 45 U.S.C. § 184, divested federal courts of subject matter jurisdiction. The district court also dismissed the action with respect to the second pension plan for lack of standing because Hastings and Karpiuk were not participants, beneficiaries or fiduciaries of that plan. We affirm.

I. BACKGROUND

In 1993, NWA and the International Association of the Machinists and Aerospace Workers ("IAM") entered into a collective bargaining agreement ("IAM Equity Agreement"). Under the IAM Equity Agreement, NWA employees who were IAM union members received shares of NWA Series C Voting Convertible Exchangeable Preferred Stock in consideration for wage concessions. Three other NWA employee groups reached similar agreements: the Air Lines Pilots' Association International ("ALPA"), the International Brotherhood of Teamsters, and NWA management. NWA placed the preferred stock into the Northwest Airlines Corporation Employee Stock Plan ("Employee Plan"), a new profit-sharing plan. The Employee Plan was divided into separate trust accounts for each of the four employee groups.

As part of and simultaneous with the IAM Equity Agreement, NWA and IAM entered into a trust agreement ("IAM Trust Agreement"). The IAM Trust Agreement established the rules governing IAM's separate trust in the Employee Plan, including the powers and duties assigned to the IAM trustees. The IAM trustees are the named fiduciaries who have the "authority to control and manage the operation and administration of the plan." 29 U.S.C. § 1102(a)(1). Both the TAM Equity Agreement and the IAM Trust Agreement allowed the IAM to appoint and remove trustees; however, such actions required NWA's concurrence.

In 2002, the Employee Plan was terminated. TAM and NWA entered into a merger agreement, pursuant to which the preferred stock was transferred from the Employee Plan to a NWA-sponsored 401(k) Retirement Savings Plan for Contract Employees ("IAM Plan"). The IAM Trust Agreement continued to apply, and the IAM trustees retained their authority over the NWA preferred stock held in the IAM Plan.

The ALPA had a similar arrangement. Their preferred stock was transferred to a NWA-sponsored 401(k) Retirement Savings Plan for Pilot Employees ("Pilot Plan"). A Retirement Board consisting of two members selected by NWA and two members selected by the ALPA served as trustees of the Pilot Plan.

According to the collective bargaining agreements, the NWA preferred stock could not be sold on the open market. Rather, it had an exercisable put option. This option required NWA to buy the preferred stock back at a fixed price of $46.96 per share if the trustees exercised the put after June 1, 2003 and before August 2, 2003. The IAM trustees timely exercised the put option, but NWA did not redeem the shares. The trustees then obtained a court order requiring NWA to honor its agreement. However, the IAM trustees accepted NWA common stock, in lieu of cash, for the repurchase of the preferred stock. Hastings and Karpiuk assert that the Pilot Plan also obtained NWA common stock through similar circumstances.

From January 1, 2001, to June 20, 2005, NWA suffered operating losses of $3.6 billion and its debt increased by $5 billion. During this period, several NWA executives, who Hastings and Karpiuk allege are fiduciaries to the pension plans, sold their personal shares of NWA common, stock. Nonetheless, the TAM Plan and the Pilot Plan retained their shares of NWA common stock as the price of the stock fell. On September 14, 2005, NWA filed for bankruptcy.

Hastings and Karpiuk were JAM members employed by NWA and were participants in the JAM Plan. On April 28, 2006, Hastings and Karpiuk commenced this class action lawsuit against certain NWA executives ("NWA Defendants"), alleging that they were fiduciaries of both the JAM Plan and the Pilot Plan, and the Pilot Plan Retirement Board ("Pilot Defendants") as fiduciaries of the Pilot Plan. Although the NWA Defendants were not trustees of the JAM Plan, Hastings and Karpiuk assert that they are fiduciaries because they have the authority under the collective bargaining agreements to reject IAM's appointment or removal of trustees. Hastings and Karpiuk claim that the NWA Defendants and the Pilot Defendants breached their fiduciary duty under ERISA, 29 U.S.C. §§ 1109, 1132(a)(2). Specifically, Hastings and Karpiuk allege that (1) the defendants failed to prudently and loyally manage the IAM Plan's and Pilot Plan's assets; (2) the NWA Defendants failed to adequately monitor the TAM trustees and the Pilot Defendants by not ensuring that they had accurate information regarding NWA's deteriorating business prospects; and (3) certain NWA Defendants breached their duty to avoid conflicts of interest because they failed to ensure that the IAM Plan and the Pilot Plan divested their holdings of NWA common stock when it appeared imprudent to continue holding it, thus ensuring that their personal NWA common stock holdings could be sold at a higher price.

The defendants filed motions to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). With respect to the JAM Plan, the district court dismissed the case against the NWA Defendants because the RLA's mandatory arbitration provision, 45 U.S.C. § 184, divested the district court of subject matter jurisdiction.² With respect to the Pilot Plan, the district court dismissed the case against the Pilot Defendants and the NWA Defendants, holding that Hastings and Karpiuk did not have statutory standing under ERISA, 29 U.S.C. §§ 1132(a)(2), (e)(1), because neither was a participant, beneficiary or fiduciary of the Pilot Plan. Hastings and Karpiuk appeal.

II. DISCUSSION

"We review de novo the grant of a motion to dismiss for lack of subject matter jurisdiction under Rule 12(b)(1) and the grant of a motion to dismiss for failure to state a claim under Rule 12(b)(6)." OnePoint Solutions, LLC v. Borchert, 486 F.3d 342, 347 (8th Cir.2007) (internal citations omitted). We must accept all factual allegations in the pleadings as true and view them in the light most favorable to the nonmoving party. Kohl v. Casson, 5 F.3d 1141, 1148 (8th Cir.1993) (stating the standard of review regarding an appeal from the grant of a Rule 12(b)(6) motion); Osborn v. United States, 918 F.2d 724, 729 n. 6 (8th Cir.1990) (finding that "the nonmoving party receives the same protections [for facial attacks under 12(b)(1) ] as it would defending against a motion brought under Rule 12(b)(6)").

A. The IAM Plan

Congress expanded the RLA to the airline industry to promote stability in labor-management relations between carriers by air and their employees. 45 U.S.C. §§ 151a, 181, 184; Hawaiian Airlines Inc. v. Norris, 512 U.S. 246, 252, 114 S.Ct. 2239, 129 L.Ed.2d 203 (1994). To accomplish this goal, the RLA requires parties to arbitrate all "minor disputes" before an adjustment board, which Congress authorized to settle labor-management disputes regarding collective bargaining agreements in the airline industry. Hawaiian Airlines, 512 U.S. at 252, 114 S.Ct. 2239; see 45 U.S.C. § 185; Jenisio v. Ozark Airlines Inc. Ret. Plan for Agent & Clerical Employees, 187 F.3d 970, 972-73 (8th Cir. 1999). Minor disputes involve "disputes ... growing out of ... the interpretation or application of [collective bargaining] agreements concerning rates of pay, rules, or working conditions." Jenisio, 187 F.3d at 972-73 (quoting 45 U.S.C. § 184). "[T]here is a presumption that disputes are minor and thus arbitrable." Id. at 973. "The [adjustment] [b]oard has mandatory, exclusive, and comprehensive jurisdiction over minor disputes ...." Id. (citing. Bhd. of Locomotive Eng'rs v. Louisville & Nashville R.R., 373 U.S. 33, 39, 83 S.Ct. 1059, 10 L.Ed.2d 172 (1963)).

Hastings and Karpiuk assert that Congress did not intend the RLA's mandatory...