Trs. of Mich. Reg'l Council of Carpenters' Emp. Benefits Fund v. H.B. Stubbs Co., 2:14–cv–11393.
| Citation | 33 F.Supp.3d 884 |
| Decision Date | 17 July 2014 |
| Docket Number | No. 2:14–cv–11393.,2:14–cv–11393. |
| Parties | TRUSTEES OF MICHIGAN REGIONAL COUNCIL OF CARPENTERS' EMPLOYEE BENEFITS FUND ; Trustees of Michigan Regional Council of Carpenters' Annuity Fund; Trustees of Carpenters' Pension Trust Fund—Detroit and Vicinity ; Trustees of the Detroit Carpentry Joint Apprenticeship and Training Fund; Trustees of the U.B.C. Advancement Fund; Trustees of the Carpenters' Working Dues Fund; Trustees of the Carpenters' Special Assessment Fund; the Michigan Regional Council of Carpenters, United Brotherhood of Carpenters and Joiners of America, Plaintiffs; and Comerica Bank, Intervening Plaintiff; v. H.B. STUBBS COMPANY, n/k/a H.B. Stubbs Company, L.L.C. ; H.B. Stubbs Holdings, Inc. ; H.B. Stubbs Company, L.L.C. —East; H.B. Stubbs Company, L.L.C. —West; H.B. Stubbs Properties, L.L.C; Scott Stubbs ; Stephen H. Stubbs; and Kenneth W. Jacobson, Defendants. |
| Court | U.S. District Court — Eastern District of Michigan |
Bryan M. Beckerman, Novara, Tesija, Southfield, MI, for Plaintiffs.
Dennis J. Levasseur, Bodman, Detroit, MI, for Intervening Plaintiff.
Erika D. Hart, Charles J. Taunt Assoc., Birmingham, MI, for Defendants.
This case presents the following legal question: assuming a company agreed to, but did not pay contributions to an employee-benefit plan governed by ERISA, are those due-and-owing contributions plan assets such that a company official violates fiduciary duties owed to the plan by paying the company's other creditors instead of the plan? Plaintiffs are the trustees of various employee-benefit funds (e.g., the Trustees of Michigan Regional Council of Carpenters' Employee Benefits Fund) (“the Trustees”). In Count III of a four-count complaint they accuse three officers of various companies operating under the “H.B. Stubbs” name—Defendants Scott Stubbs (“Scott”), Stephen H. Stubbs (“Stephen”), and Kenneth W. Jacobson (“Jacobson”)—of breaching fiduciary obligations owed to the funds under the Employee Retirement Income Security Act of 1974. The Trustees say that “numerous cases from [the Eastern District of Michigan] confirm ... that an individual defendant violates the applicable ERISA sections by paying other creditors instead of making benefit payments because benefit payments become fund property once they are due and owing.” (Dkt. 51, Pl.'s Resp. to Def.'s Mot. to Dismiss at 9.) Before the Court is Defendants' motion to dismiss Count III pursuant to Federal Rule of Civil Procedure 12(b)(6). Defendants argue that Scott's, Stephen's, and Jacobson's decisions on which bills to pay were corporate, not fiduciary, in nature. Although the Court's ruling rests primarily on a different (but related) rationale, the Court does agree with Defendants that Count III fails to state a plausible breach-of-fiduciary-duty claim. It will thus be dismissed from this suit.
Because Defendants have moved pursuant to Rule 12(b)(6), the Court accepts as fact all of the non-conclusory allegations in the Complaint and draws reasonable inferences from those well-pled allegations in the Trustees' favor. See Hunter v. Sec'y of U.S. Army, 565 F.3d 986, 992 (6th Cir.2009). The following summary, although it includes some background allegations from Defendants' motion, adheres to this standard.
The H.B. Stubbs entities are, or perhaps more accurately, were, in the business of “exhibit and event marketing.” (Dkt. 36, Defs.' Mot. to Dismiss at 5.) With locations in both Michigan and Utah, the H.B. Stubbs entities helped design and set up exhibits at shows around the country, including, for example, the North American International Auto Show in Detroit, Michigan. (Id. ) Apparently, much of the entities' work was tied to the automotive industry, and, with the bankruptcy of General Motors, “H.B. Stubbs was hit hard ... to the tune of approximately $1 million.” (Id. )
More recently, the H.B. Stubbs entities lost three customers constituting half their volume. (Id. at 6.) This caused the entities to downsize and, in March 2014, seek a $2.7 million forbearance with their lender, Comerica Bank. The entities argue that “Comerica has a first priority security interest on all of the assets of each of the H.B. Stubbs entities to secure its loan—which, by any calculation, is in excess of the value of the assets of H.B. Stubbs.” (Id. ) .)) Defendants add that, “[o]ver the years,” the Stubbs family put in “millions of their own funds in an effort to support the company.” (Defs.' Mot. to Dismiss at 6.) Nonetheless, H.B. Stubbs is now winding down its affairs. (See id. )
Given the financial condition of the H.B. Stubbs entities, Count III of the Trustees' Complaint, the only (remaining) count asserting that Scott, Stephen, and Jacobson are personally liable, is critical to the Trustees' ability to recover in this lawsuit. The Trustees, representing an employee-benefits fund, a pension fund, and an apprenticeship fund (), say that the H.B. Stubbs entities employed participants of their funds to work on various construction projects in Michigan. According to the Trustees, H.B. Stubbs was contractually obligated to make contributions to their funds for the benefit of the people it employed, but failed to make over $500,000 worth of contributions. (See Compl. ¶¶ 14–18.) The Trustees also maintain that the unpaid contributions became “plan assets” within the meaning of ERISA “at the time they became due.” (Compl. ¶ 28.) And that Scott, Stephen, and Jacobson, “as owners and/or officers of H.B. Stubbs, personally exercised authority and control over H.B. Stubbs' unpaid fringe benefit contributions.” (Compl. ¶ 29.) Building on these last two assertions, the Trustees conclude that the three officers breached fiduciary obligations owed to their funds under ERISA by “directing that H.B. Stubbs' assets ... be paid to other creditors and/or parties instead of being deposited with [the] [f]unds.” (Compl. ¶ 31.) Accordingly, say the Trustees, Scott, Stephen, and Jacobson are “personally liable” to the funds in the amount of $543,916.24. (Compl. ¶ 33.)
Defendants believe that even accepting all of these allegations as fact, the Trustees' narrative does not state a claim upon which relief may be granted. They thus move to dismiss Count III pursuant to Federal Rule of Civil Procedure 12(b)(6). Defendants also moved to dismiss Counts II and IV of the Complaint (Defs.' Mot. at 6–7), but the Trustees have agreed to voluntarily dismiss those counts without prejudice ). Defendants have not moved to dismiss Count I, which seeks to hold only H.B. Stubbs liable. (See Defs.' Mot. at 6–7.)
Although the Trustees cite older cases in support of “lenient standards of ‘notice pleading’ ” , the Supreme Court's decisions in Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), and Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009), set the pleading standard. Under the plausibility standard articulated in those cases, when a defendant moves to dismiss pursuant to Rule 12(b)(6), a court can first cull legal conclusions from the complaint, leaving only factual allegations to be accepted as true. Iqbal, 556 U.S. at 679, 129 S.Ct. 1937. The question then becomes whether the remaining assertions of fact (and reasonable inferences drawn from them, Lutz v. Chesapeake Appalachia, L.L.C., 717 F.3d 459, 464 (6th Cir.2013) ), “allow[ ] the court to draw the reasonable inference that the defendant is liable for the misconduct alleged,” Iqbal, 556 U.S. at 678, 129 S.Ct. 1937. Although this plausibility threshold is more than “sheer possibility that a defendant ... acted unlawfully,” it is not a “ ‘probability requirement.’ ” Id. at 678, 129 S.Ct. 1937 (quoting Twombly, 550 U.S. at 556, 127 S.Ct. 1955 ). Whether a plaintiff has presented enough factual matter to “ ‘nudg [e]’ ” its claim “ ‘across the line from conceivable to plausible’ ” is “a context-specific task” requiring this Court to “draw on its judicial experience and common sense.” Iqbal, 556 U.S. at 679, 683, 129 S.Ct. 1937 (quoting Twombly, 550 U.S. at 570, 127 S.Ct. 1955 ).
Applying this legal standard, Defendants' motion asks the Court to find that it is implausible that Scott, Stephen, and Jacobson breached fiduciary obligations owed to the funds under ERISA by paying H.B. Stubbs' other creditors instead of the funds. This inquiry begins with whether Scott, Stephen, and Jacobson were fiduciaries under ERISA.
29 U.S.C. § 1002(21)(A) (emphasis added). Thus, under § 1002(21)(A)(i), which is the only statutory provision fairly implicated by Count III (see Compl. ¶¶ 29–30), the Trustees must plead factual matter permitting the reasonable inference that (1) H.B. Stubbs' unpaid benefit contributions were “[plan] assets” and (2) Scott, Stephen, and Jacobson exercised “authority or control” over the “management or disposition” of...
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