Pruter v. Local 210’s Pension Trust Fund and Local 210, International Brotherhood of Teamsters
February 8, 2016 2016 WL 908303 United States District Court, S.D. New York. Janet Pruter, et al., Plaintiffs, v. Local 210 ‘s Pension Trust Fund and Local 210, International Brotherhood of Teamsters, Defendants. 15 Civ. 1153(AT) Signed February 8, 2016 MEMORANDUM AND ORDER ANALISA TORRES , United States District Judge *1 Plaintiffs, former employees of World Airways, Inc. (“World”), bring this action against Defendants, Local 210’s Pension Trust Fund (the “Fund”) and Local 210, International Brotherhood of Teamsters (“Local 210”), seeking damages for fraud, breach of contract, and violation of an employee benefit plan (the “Plan”) administered by the Fund. The Fund and Local 210 each move to dismiss the amended complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) . For the reasons stated below, the motions are GRANTED. BACKGROUND 1 Plaintiffs are former employees of World, a now-defunct airline that filed for federal bankruptcy protection in 2012. Am. Compl. ¶¶ 8–95, 110, ECF No. 4. In 1996, the labor union that had been representing Plaintiffs merged with Local 210, and Local 210 began negotiating a new collective bargaining agreement on behalf of Plaintiffs. Id. 102–03. During the negotiations, Local 210 proposed replacing Plaintiffs’ existing pension plan with the Plan, and promised that the Plan would account for Plaintiffs’ previous employment with World. Id. 104–05. Specifically, after Plaintiffs had participated in the Plan for five years, they would receive credit for “past service time,” which would be funded by World under the terms of the new collective bargaining agreement. Id. ¶ 104. Local 210 also promised Plaintiffs that it would assume liability for funding the past service credit should World be unable to do so. Id. Plaintiffs thereafter voted to ratify the collective bargaining agreement and participate in the Plan. Id. ¶ 106. After the collective bargaining agreement was finalized, Local 210 stated that it had paid over $700,000 to fund the past service credits. Id. ¶ 107. Between 1996 and 2001, World made contributions to the Fund, and by 2001, the past service credits had been fully funded. Id. ¶ 109. When World filed for bankruptcy in 2012, its liabilities to the Fund were discharged, causing a funding shortfall for the Fund. Id. ¶¶ 110–11. The Fund’s trustees, therefore, decided in December 2012 to cancel Plaintiffs’ past service credits. Id. ¶ 111. Upon inquiry from Plaintiffs’ counsel, the Fund’s attorney stated in a letter dated June 14, 2013 that the Fund had never received contributions from World for the past service credits, and that the Fund had authority to cancel the credits under Section 14.5(b) of the Plan’s governing document. Letter from Marianne Manning Russo to Arthur Z. Schwartz (June 14, 2013), Am. Compl., Ex. H, ECF No. 4–8 (hereinafter “June 2013 Letter”). After pursuing administrative relief through the Fund, id. ¶ 116, Plaintiffs filed this action on February 18, 2015, ECF No. 1. Plaintiffs allege that the Fund violated the terms of the Plan by cancelling the past service credits earned by each Plaintiff. Am. Compl. ¶ 119. Plaintiffs also allege that Local 210 committed fraud by making false representations to Plaintiffs in the course of negotiating the 1996 collective bargaining agreement, and breach of contract by failing to contribute the $700,000 that it had agreed to pay to the Fund. Id. ¶¶ 120–24. DISCUSSION I. Legal Standard *2 To survive a Rule 12(b)(6) motion to dismiss, “a complaint must contain sufficient factual matter … to ‘state a claim to relief that is plausible on its face.” ‘ Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. Twombly, 550 U.S. 544, 570 (2007) ). A plaintiff is not required to provide “detailed factual allegations,” but must assert “more than labels and conclusions.” Twombly, 550 U.S. at 555 . Ultimately, the “[f]actual allegations must be enough to raise a right to relief above the speculative level.” Id. On a Rule 12(b)(6) motion, the court may consider only the complaint, documents attached to the complaint, matters of which a court can take judicial notice, or documents that the plaintiff knew about and relied upon in bringing suit. See Chambers v. Time Warner, Inc., 282 F.3d 147, 153 (2d Cir.2002) . The court must accept the allegations in the complaint as true and draw all reasonable inferences in favor of the non-movant. See ATSI Commc’ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir.2007) . II. Analysis The Fund moves for dismissal of Plaintiffs’ claim under Section 502(a)(1)(B) of the Employment Retirement Income Security Act of 1974 (“ERISA”) on the ground that Plaintiffs fail to state a claim for relief. Local 210 moves for dismissal of Plaintiffs’ state law claims, arguing that Plaintiffs’ breach of contract and fraud claims are preempted by the Railway Labor Act, 45 U.S.C. § 151, et seq. For the reasons stated below, the motions to dismiss are GRANTED. A. Plaintiffs’ Section 502(a)(1)(B) Claim A denial of benefits challenged under Section 502(a)(1)(B) “is to be reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan.” 2 Ocampo v. Bldg. Serv. 32B–J Pension Fund, 787 F.3d 683, 689–90 (2d Cir.2015) (internal quotation marks omitted) (quoting Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989) ). Where the plan administrator is given such discretion, a court may overturn the denial of benefits only if it was “arbitrary and capricious,” that is, “without reason, unsupported by substantial evidence or erroneous as a matter of law.” Id. at 690 (internal quotation marks omitted) (quoting Miles v. Principal Life Ins. Co., 720 F.3d 472, 486 (2d Cir.2013) ). Under this deferential standard, “[w]here both the plan administrator and a spumed claimant offer rational, though conflicting, interpretations of plan provisions, the administrator’s interpretations must be allowed to control.” McCauley v. First Unum Life Ins. Co., 551 F.3d 126, 132 (2d Cir.2008) (internal quotation marks omitted) (quoting Pulvers v. First UNUM Life Ins. Co., 210 F.3d 89, 92–93 (2d Cir. 2000) ). “Nevertheless, where the administrator imposes a standard not required by the plan’s provisions, or interprets the plan in a manner inconsistent with its plain words, its actions may well be found to be arbitrary and capricious.” Id. at 133 (internal quotation marks omitted) (quoting Pulvers, 210 F.3d at 93 ). Here, because the Plan vests discretionary authority in its trustees, see Plan Document § 10.2, Am. Compl., Ex. A, ECF No. 4–1 (stating that the Plan’s trustees “shall have the exclusive right, power and authority, in their sole and absolute discretion, to administer, apply and interpret the Plan to decide all matters arising in connection with the operation or administration of the Plan”), the arbitrary and capricious standard applies. Plaintiffs argue that the Plan trustees’ denial of benefits was improper under this standard because the trustees cancelled Plaintiffs’ past service credits, despite the fact that those credits had been fully funded by World and secured by Local 210. Am. Compl. ¶¶ 107, 109, 111. These factual allegations do not, however, establish that the trustees’ actions were arbitrary and capricious. The Plan’s trustees are permitted to, “in the interest of preserving the actuarial soundness of the Fund, limit the liability of the Fund so that [it] is not liable for benefits accrued as a result of service within a bargaining unit before it participated in the Plan, after it ceased to participate in the Plan….” Plan Document § 14.5(b); see also id. § 14.5(a) (an employer ceases to participate in the Plan when it, inter alia, “fails to make contributions for which it is obligated for the unit for a period of one hundred twenty (120) days”). The Fund’s trustees considered the past service credits to be “accrued as a result of service within a bargaining unit before it participated in the Plan,” Am. Compl. ¶ 119, and they determined that Section 14.5(b) permitted cancellation, given the Fund’s financial difficulties following World’s bankruptcy and the cessation of World’s participation in the Plan, June 2013 Letter. The trustees’ interpretation of their authority to cancel past service credits is supported by the plain language of Section 14.5(b), and despite drawing all reasonable inferences in favor of Plaintiffs, the Court cannot conclude that the trustees’ decision was “without reason, unsupported by substantial evidence or erroneous as a matter of law.” Ocampo, 787 F.3d at 690 (internal quotation marks omitted) (quoting Miles, 720 F.3d at 486 ). *3 Plaintiffs suggest that once the past service credits were fully funded in 2001, World became a retroactive “participant” within the meaning of Section 14.5(b) such that the past service credits were converted into “future service credits” whose cancellation was impermissible under Section 14.5(b). However, Plaintiffs cite no authority—from the Plan or otherwise—for the proposition that Plaintiffs’ past service credits were converted into future service credits upon being fully funded, and the Court finds none upon a review of the Plan. See Guerrero v. FJC Sec. Servs. Inc., 423 F. App’x 14, 16–17 (2d Cir. May 23, 2011) (summary order) (affirming dismissal of ERISA claim where the plaintiff “did not identify anything in the plans as that entitled him to a particular benefit he sought to enforce”); Graffino v. Trs. of NYSAILA Pension Tr. Fund and Plan, No. 14 Civ. 8577, 2015 WL 4241408, at *2 (S.D.N.Y. July 13, 2015) . Accordingly, because Plaintiffs have failed to state a plausible claim for relief, the Fund’s motion to dismiss Plaintiffs’ Section 502(a)(1)(B) claim is GRANTED. B. Plaintiffs’ State Law Claims Under federal law, a union has a duty to fairly represent employees for whom it acts as a bargaining representative, “both in its collective bargaining with [employers], and in its enforcement of the resulting collective bargaining agreement.” Vaca v. Sipes, 386 U.S. 171, 177 (1967) (citations omitted); see also Air Line Pilots Ass’n, Intern. v. O’Neill, 499 U.S. 65, 77 (1991) ( “[W]e have repeatedly noted that the Vaca v. Sipes standard applies to ‘challenges leveled not only at a union’s contract administration and enforcement efforts but at its negotiation activities as well.’ ” (quoting Comm’ns Workers v. Beck, 487 U.S. 735, 743 (1988) )). The duty of fair representation “includes a statutory obligation to serve the interests of all members without hostility or discrimination toward any, to exercise its discretion with complete good faith and honesty, and to avoid arbitrary conduct.” Vaca, 386 U.S. at 177 . Because federal law defines the scope of the duty of fair representation, state law claims relating to “conduct during collective bargaining negotiations” are preempted. See Lindsay v. Assoc. of Prof’l Flight Attendants, 581 F.3d 47, 59–60 (2d Cir.2009) (noting that the “imposition of additional state liability … would upset the ‘balance of power’ established by the RLA and ‘frustrate effective implementation of the [Act’s] processes’ ” (first quoting Golden State Transit Corp. v. City of Los Angeles, 475 U.S. 608, 619 (1986) ; and then quoting Bhd. of R.R. Trainmen v. Jacksonville Terminal Co., 394 U.S. 369, 380 (1969) )); see also Cooper v. TWA Airlines, LLC, 349 F.Supp.2d 495, 507–08 (E.D.N.Y.2004) (“[S]tate law claims that are ‘mere refinements’ of the duty of fair representation are preempted.”). Plaintiffs’ state law claims arise from Local 210’s conduct during its negotiation of the 1996 collective bargaining agreement. Because such conduct is governed by the federal duty of fair representation, Plaintiffs’ breach of contract and fraud claims are preempted. See Lindsay, 581 F.3d at 59–60 ; Cooper, 349 F.Supp.2d at 508 . Moreover, because a six-month statute of limitations applies to a breach of the duty of fair representation, Haerum v. Air Line Pilots Ass’n, 892 F.2d 216, 219 (2d Cir.1989) , any claims that Plaintiffs could assert for breach of the duty of fair representation are time-barred. The relevant negotiations were conducted in 1996, and Plaintiffs learned in or around December 2012 that the past service credits had been canceled. Am. Compl. ¶¶ 111,113. Plaintiffs did not file this action until February 18, 2015. Accordingly, Local 210’s motion to dismiss Plaintiffs’ state law claims is GRANTED. CONCLUSION For the foregoing reasons, Defendants’ motions to dismiss are GRANTED, and the amended complaint is DISMISSED. The Clerk of Court is directed to terminate the motions at ECF Nos. 18 and 21 and to close the case. *4 SO ORDERED. All Citations Slip Copy, 2016 WL 908303 Footnotes 1 The following facts are taken from the amended complaint and accepted as true for the purposes of this motion. See ATSI Commc’ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir.2007) . 2 Although Plaintiffs do not expressly reference ERISA in their claim against Local 210 Pension Fund, the Court construes the claim to be brought pursuant to Section 502(a)(1)(B) of ERISA as Plaintiffs seek to enforce their rights to benefits under a pension plan pursuant to ERISA. See, e.g., Aramony v. United Way of America, 949 F.Supp. 1080, 1083–84 (S.D.N.Y.1996) .