JLNW, Inc. v. Fund
| Decision Date | 28 September 2018 |
| Docket Number | 17-CV-5095 (AJN) |
| Parties | JLNW, Inc., Plaintiff, v. National Retirement Fund, Defendant. |
| Court | U.S. District Court — Southern District of New York |
In this action, Plaintiff JLNW, Inc. (formerly known as Carole Wren, Inc.) ("Carole Wren"), brings claims against Defendant National Retirement Fund ("the Fund") challenging an interim arbitration award in the Fund's favor under the Multiemployer Pension Plan Amendments Act ("MPPAA"), 29 U.S.C. § 1381 et seq. (2012).
Currently before the Court is Defendant's motion to dismiss for lack of subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1) or, in the alternative, to dismiss for failure to state a claim upon which relief can be granted under Rule 12(b)(6).
On a motion to dismiss under Rule 12(b)(6), "consideration is limited to the factual allegations in plaintiff['s] . . . complaint, which are accepted as true" as well as "documents attached to the complaint as an exhibit or incorporated in it by reference, to matters of which judicial notice may be taken, or to documents either in plaintiff['s] possession or of which plaintiffs had knowledge and relied on in bringing suit." Brass v. Am. Film Techs., Inc., 987 F.2d 142, 150 (2d Cir. 1993). Even if a document is not incorporated by reference, the court may nevertheless consider it if the complaint "relies heavily upon its terms and effect," which renders the document "integral" to the complaint, Int'l Audiotext Network, Inc. v. Am. Tel. & Tel. Co., 62 F.3d 69, 72 (1995). Similarly, on a motion to dismiss under 12(b)(1), a court may consider documents incorporated by reference in the pleadings. See Amidax Trading Grp. v. S.W.I.F.T. SCRL, 671 F.3d 140, 145 (2d Cir. 2011). Accordingly, the following statement of facts is drawn from Plaintiff's complaint, Complaint ("Compl."), Dkt. No. 5, and from several of Defendant's exhibits, which, as Plaintiff acknowledges, are incorporated by reference in Plaintiff's complaint.1
The Fund is a Taft Hartley Trust Fund with trustees representing both labor organizations and employers that contribute to the Fund. Id. ¶ 3. The Fund constitutes a multiemployer fund under the Employee Retirement Income Security Act, 29 U.S.C. § 4001 et seq. (2012). Id. ¶ 4. Carole Wren employed union members and as a result contributed to the Fund. Id. ¶¶ 7-8. The parties' briefings diverge slightly as to the date of Carole Wren's complete withdrawal, but both indicate it had occurred by January of 2014. Id. ¶ 9; Memorandum of Law in Support of Defendant National Retirement Fund's Motion to Dismiss the Complaint ("Def.'s Mot."), at 2.
On June 16, 2104, the Fund informed Carole Wren that it had assessed its liability for withdrawing from the plan at $933,163. Compl. ¶ 10; Ex. A. In a letter sent on August 21, 2014, Carole Wren challenged the Fund's assessment on two principal grounds. Compl. ¶ 11; Ex. B. On August 18, 2015, The Fund issued a revised assessment of Carole Wren's liability, which it placed at $2,419,631. Compl. ¶ 14; Ex. E, Carole Wren requested review of this revised assessment through its letter of November 12, 2015, which put forward seven challenges to theassessment. Compl. ¶ 15; Ex. F at 2-6. After the Fund did not respond, Carole Wren requested arbitration before the American Arbitration Association under the MPPAA on April 29, 2016. Compl. ¶ 16; Ex. G. In its arbitration request, Carole Wren re-stated its contentions that it "challenges all aspects of the withdrawal liability claim" on a number of grounds, including "all bases set forth in its November 12, 2015 and August 21, 2014 letters to [the Fund] requesting review of the assessment." Ex. G at 2.
The parties agreed to a stipulation of undisputed facts and to move forward before Arbitrator Mark Grossman with the specific question of whether Section 4225(a) of ERISA, 29 U.S.C. § 1405, limited Carole Wren's withdrawal liability for any partial withdrawals prior to its complete withdrawal from the Fund. Compl. ¶ 18; Ex. I. The parties agreed that "all other issues will be held in abeyance." Ex. I. On June 9, 2017, the arbitrator found in favor of the Fund, finding that Section 4225(a) did not apply to any previous partial withdrawals. Compl. ¶ 19; Ex. J at 18-19. On July 7, 2017, Carole Wren filed a complaint with this Court, arguing that the arbitrator's decision had been incorrect as a matter of law and requesting: (i) that the arbitrator's June 9, 2017, decision be vacated and for the Court to find that as a matter of law Section 4225(a) does in fact apply to any prior partial withdrawals; (ii) that the Court order the Fund to reimburse Carole Wren for all withdrawal liability payments made during the pendency of the dispute above and beyond what it would owe if Section 4225(a) did, in fact, apply, as well as interest thereon; (iii) and any other relief the Court would deem appropriate. Compl. at 4.
On October 27, 2017, Defendant filed the present motion to dismiss for lack of subject matter jurisdiction under Rule 12(b)(1) or, in the alternative, to dismiss for failure to state a claim upon which relief can be granted under Rule 12(b)(6). Dkt. No. 14. Plaintiff filed a response on November 10, 2017. Dkt. No. 19. On November 17, Plaintiff requested oral argument on themotion to dismiss, Dkt. No. 20, and Defendant filed a reply in support of its motion to dismiss, Dkt. No. 21.
Dismissal of a case under Rule 12(b)(1) is appropriate "when the district court lacks the statutory or constitutional power to adjudicate it." Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000). "A plaintiff asserting subject matter jurisdiction has the burden of proving by a preponderance of the evidence that it exists." Id. On a motion to dismiss for lack of jurisdiction, a court may properly consider documents incorporated by reference in the complaint. Amidax, 671 F.3d at 145.
Under Rule 12(b)(6), the Court accepts all factual allegations in the complaint as true, construes the complaint liberally, and draws all reasonable inferences in plaintiff's favor. McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 191 (2d Cir. 2007). To survive such a motion, the complaint "must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). The plaintiff's obligation to provide grounds for its entitlement to relief "requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555.
The principal question before the Court is whether the arbitration proceedings are sufficiently "complete" to entitle Plaintiff to judicial review. The MPPAA requires that "[a]ny dispute between an employer and the plan sponsor of a multiemployer plan concerning a determination made under sections [governing withdrawal liability] shall be resolved through arbitration." 29 U.S.C. § 1401(a)(1). Then "[u]pon completion of the arbitration proceedings infavor of one of the parties, any party thereto may bring an action, no later than 30 days after the issuance of an arbitrator's award, in an appropriate United States district court in accordance with section 1451 of this title to enforce, vacate, or modify the arbitrator's award." Id. § 1401(b)(2).
Defendant argues that the proceedings before the arbitrator are not complete within the meaning of § 1401(b)(2) and that therefore this Court either lacks subject matter jurisdiction over Plaintiff's claim, or, in the alternative, that for the same reason Plaintiff failed to state a claim due to failure to exhaust in arbitration. Plaintiff responds that § 1401(b)(2) is not jurisdictional. Plaintiff further contends that because the arbitrator had disposed of the "separate and independent claim" of Section 4225(a)'s applicability, the arbitration proceedings were complete within the meaning of § 1401(b)(2), primarily because that section must be read in conjunction with the Federal Arbitration Act (FAA), 9 U.S.C. §1 et. seq. (2012). On reply, Defendant continues to argue that this Court lacks jurisdiction, argues that the FAA does not apply to § 1401(b)(2), and argues in the alternative that even if the FAA applied, this Court would only be able to confirm—not vacate—the underlying award.
Where a court has before it motions under both Rule 12(b)(1) and 12(b)(6), "the court should consider the Rule 12(b)(1) challenge first since if it must dismiss the complaint for lack of subject matter jurisdiction, the accompanying defenses and objections become moot and do not need to be determined." Rhulen Agency, Inc. v. Alabama Ins. Guar. Ass'n, 896 F.2d 674, 678 (2d Cir. 1990). Accordingly, the Court will first determine whether 1401(b)(2)'s completion requirement is jurisdictional. Having determined that it is not, the Court will then turn to whether the arbitration in this case was sufficiently complete as to warrant review. Finally, the Court willaddress Defendant's claim that if the FAA applied, the Court would not have authority to vacate the award for legal error.
Defendant has moved to dismiss Plaintiff's complaint for lack of jurisdiction under Rule 12(b)(1) on the grounds that § 4221(b)(2) of ERISA imposes a bar on federal district court jurisdiction until after the arbitration is complete. Plaintiff responds that § 4221 (b)(2)'s exhaustion requirement is prudential, not jurisdictional.
Plaintiff is correct. The Second Circuit has concluded that the MPPAA's arbitration requirement is not jurisdictional. T.I.M.E.-DC, Inc. v. Mgmt.-Labor Welfare & Pension Funds, of Local 1730 Int'l Longshoremen's Ass'n, 756 F.2d 939, 945 (2d Cir. 1985) (...
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