McDougall v. Donovan

• Decision Date: 23 November 1982
• Docket Number: No. 81 C 5891.,81 C 5891.
• Citation: 552 F. Supp. 1206
• Parties: Howard McDOUGALL, Thomas F. O'Malley, R.V. Pulliam, Sr., Robert J. Baker, Loran W. Robbins, Marion M. Winstead, Harold J. Yates and Earl L. Jennings, Jr., as Trustees of Central States, Southeast and Southwest Areas Pension Fund, Plaintiffs, v. Raymond J. DONOVAN, Secretary of Labor, Defendant-Counterplaintiff, Howard McDougall, Thomas F. O'Malley, R.V. Pulliam, Sr., Robert J. Baker, Loran W. Robbins, Marion M. Winstead, Harold J. Yates and Earl L. Jennings, Jr., Individually and as Trustees of Central States, Southeast and Southwest Areas Pension Fund, and Earl N. Hoekenga, and Central States Pension Fund, and the Central Conference of Teamsters, Counterdefendants.
• Court: U.S. District Court — Northern District of Illinois

552 F. Supp. 1206

Howard McDOUGALL, Thomas F. O'Malley, R.V. Pulliam, Sr., Robert J. Baker, Loran W. Robbins, Marion M. Winstead, Harold J. Yates and Earl L. Jennings, Jr., as Trustees of Central States, Southeast and Southwest Areas Pension Fund, Plaintiffs, v. Raymond J. DONOVAN, Secretary of Labor, Defendant-Counterplaintiff Howard McDougall, Thomas F. O'Malley, R.V. Pulliam, Sr., Robert J. Baker, Loran W. Robbins, Marion M. Winstead, Harold J. Yates and Earl L. Jennings, Jr., Individually and as Trustees of Central States, Southeast and Southwest Areas Pension Fund, and Earl N. Hoekenga, and Central States Pension Fund, and the Central Conference of Teamsters, Counterdefendants.

No. 81 C 5891.

United States District Court, N.D. Illinois, E.D.

November 23, 1982.

James L. Coghlan, Coghlan, Joyce & Nellis, Francis Carey, Marvin Gittler, Asher, Goodstein, Pavalon, Gittler, Greenfield & Segall, Ltd., Chicago, Ill., for plaintiffs and counterdefendants.

Kenneth G. Anderson, Jacksonville, Fla., for Hoekenga, counterdefendant.

Jim Shoemake, Guilfoil, Symington, Petzall & Shoemake, St. Louis, Mo., for Central States, counterdefendant.

M.J. Mintz, Dickstein, Shapiro & Morin, Washington, D.C., for The Central Conference of Teamsters, counterdefendant.

Edward Moran, Asst. U.S. Atty., Chicago, Ill., S. Michael Scadron, U.S. Dept. of Labor, Washington, D.C., for defendant-counterplaintiff.

MEMORANDUM OPINION AND ORDER

ASPEN, District Judge:

Plaintiffs ("the Trustees"), trustees of the Central States, Southeast and Southwest Areas Pension Fund ("the Fund"),¹ filed a complaint against the Secretary of Labor ("the Secretary") seeking, inter alia, a declaratory judgment that the Trustees' acquisition on behalf of the Fund of a Falcon 20F jet aircraft from the Falcon Jet Corporation ("Falcon") was not a "prohibited transaction" under § 406 of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1106 (1976). Falcon had acquired the aircraft as a trade-in from the Central Conference of Teamsters ("the CCT").

The Secretary responded with an answer as well as a counterclaim against the Trustees individually and as trustees alleging, inter alia, that the acquisition in January, 1979, of the 20F aircraft and the leasing of hangar space by the Trustees from the CCT since at least 1975 constitute "prohibited transactions" under ERISA § 406, 29 U.S.C. § 1106, and that the on-going ownership, modification and usage of private aircraft by the Trustees since at least 1975 constitute breach of their fiduciary obligations under ERISA §§ 404, 405 and 409, 29 U.S.C. §§ 1104, 1105 and 1109. The Secretary joined as counterdefendants the Fund, the CCT and Earl N. Hoekenga ("Hoekenga"), a former trustee of the Fund.

The matter is before the Court on various procedural motions of the parties, motions to dismiss Hoekenga and the Fund, cross-motions for partial summary judgment on the counterclaim and a motion by the Trustees for summary judgment on their complaint. Jurisdiction is invoked pursuant to 29 U.S.C. § 1132.

I.

Counterdefendants Hoekenga and the Fund each move for a more definite statement of the counterclaim under Rule 12(e), Fed.R.Civ.P. Both contend that the counterclaim is vague and ambiguous, making preparation of a defense impossible.²

Under Rule 8 of the Federal Rules of Civil Procedure, a complaint need only contain a short, plain statement of the claim, indicating that the plaintiff is entitled to relief. "A complaint is sufficient if it `will give defendant fair notice of what the plaintiff's claim is and the grounds upon which it rests.'" Mathes v. Nugent, 411 F.Supp. 968 (N.D.Ill.1976), citing Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 103, 2 L.Ed.2d 80 (1957). See Archie v. Chicago Truck Drivers Etc., 585 F.2d 210, 217 (7th Cir.1978). The standard for granting a motion for a more definite statement is whether the complaint is so vague that a party cannot reasonably be required to frame a responsive pleading. 5 Wright & Miller, Federal Practice and Procedure § 1216 (1969).

In this case, the Secretary's counterclaim satisfies the requirements of Rule 8. With respect to Hoekenga, the counterclaim specifies the acts and omissions allegedly comprising breaches of fiduciary duty on the part of the Fund's trustees, the time period during which Hoekenga was a trustee, and the legal bases for the claims.³ Taken together, these allegations give Hoekenga fair notice of the claims against him and the grounds upon which they rest. With respect to the Fund, the activities from which the Secretary seeks to enjoin the Fund are enumerated with sufficient specificity.⁴

II.

Next, counterdefendants Hoekenga and Trustees respectively move under Rule 10(b) for an order compelling separate statements of the claims against them. The Secretary's counterclaim lists and classifies the transactions and occurrences upon which he bases his claims.⁵ Many if not most of the alleged actions were on-going; the Secretary asserts that the transactions spanned the tenures of the various counterdefendant trustees. Although the Secretary does not attempt to specify which of the transactions occurred or were occurring during each individual trusteeship, allegations as to the dates of tenure of the various trustees are set forth.⁶

Hoekenga and the Trustees contend that the Secretary's failure at the pleading stages to link specific transactions with specific trusteeships will cause the case to "explode into unavoidable confusion."⁷ Fear of explosion is not the appropriate standard. Rule 10(b) simply requires "that each claim founded on a separate transaction or occurrence be stated in a separate count `whenever a separation facilitates the clear presentation of matters set forth.'" Mathes v. Nugent, supra, 411 F.Supp. at 972 (emphasis added). In his counterclaim, the Secretary has set forth the transactions and occurrences giving rise to his claims in separate paragraphs.⁸ He has indicated that each allegation pertains to each trustee during his respective tenure. Under Rule 10(b), where the gist of the complaint is a scheme, plan or course of conduct, there is no requirement that each claim be stated separately merely because all the defendants may not be involved in each act or transaction. Securities and Exchange Commission v. Quing N. Wong, 252 F.Supp. 608, 614 (D.P.R.1966), 5 Wright & Miller, Federal Practice and Procedure § 1324 (1969). The Secretary's counterclaim is sufficiently clear; further separation of his claims is unnecessary.⁹

III.

Counterdefendants Hoekenga and the Fund each move to dismiss the Secretary's counterclaim under Rule 12(b).¹⁰ Their motions will be discussed separately.

1. Motion of Hoekenga

Hoekenga seeks dismissal of the claims against him on the ground that the transactions alleged in the counterclaim as the basis for the trustees' individual liability occurred before and after — but not during — his tenure as trustee.

It is true, as Hoekenga points out, that ERISA § 409(b), 29 U.S.C. § 1109(b) limits a fiduciary's liability for breach of duty to those breaches committed during his tenure.¹¹ Hoekenga asserts that his term of service as trustee began in May, 1977, and concluded in February, 1978.¹² Therefore, he contends, he cannot be liable for the alleged initial purchase of a private aircraft around January 1, 1975,¹³ nor for the purchase of the used Falcon 20F aircraft on May 31, 1979.¹⁴

Without reaching the question at this point of whether Hoekenga was a trustee at those particular times and whether liability arises under ERISA for those particular acts, we hold that the counterclaim does state a claim against Hoekenga and will not be dismissed. The Secretary alleges on-going breaches of fiduciary duty, among other things, the retention, ownership, modification and use of private aircraft.¹⁵ These occurred during Hoekenga's tenure, and, taking as true the allegations of the counterclaim as we are required to do when ruling on a motion to dismiss, Mathers Fund, Inc. v. Colwell, 564 F.2d 780, 783 (7th Cir.1977), Hoekenga was party to the acts. Moreover, even if the investments that allegedly constitute a breach of duty or a prohibited transaction were entered into prior to Hoekenga's term of office, it has been held that a successor trustee has a duty to dispose of prior investments violative of ERISA upon assuming his responsibilities. Morrissey v. Curran, 567 F.2d 546, 548-49 (2d Cir.1977). Thus, the Secretary has stated a claim against Hoekenga upon which relief may be granted.¹⁶

2. Motion of the Fund

The Fund moves to dismiss the counterclaims against it on several grounds, namely that: (1) it is not a "fiduciary" within the meaning of ERISA § 3(21), 29 U.S.C. § 1002(21), and is thus not a proper defendant to a claim brought pursuant to ERISA § 409, 29 U.S.C. § 1109; (2) it is not a proper party because no separate and distinct relief has been sought against it; (3) the relief requested is improper; and (4) the action is barred by the statute of limitations. None of these arguments persuades the Court that the Fund's motion to dismiss should be granted.

The Fund's first three objections are addressed together. Initially, it should be noted that pursuant to ERISA § 502(d)(1), 29 U.S.C. § 1132(d)(1), employee benefit plans (such as the Fund) may sue and be sued as entities under the provisions of ERISA. This the Fund does not dispute; it does, however, contend that it is not an appropriate party defendant in a suit brought under ERISA § 409, 29 U.S.C. § 1109, which deals with liability for breach of fiduciary duty.¹⁷ The Fund argues that only fiduciaries may be sued under this provision, and that the Secretary's dispute is properly with the trustees alone. This interpretation of § 409 was rejected by this Court as too narrow in denying CCT's motion to dismiss it as a defendant to the counterclaim. McDougall, et al. v. Donovan, 539 F.Supp. 596 (N.D.Ill.1982). As we...