Defendants"). The Individual Defendants previously brought a
motion to dismiss count II of the original complaint for failure
to state a claim and to dismiss counts III and IV for lack of
federal jurisdiction. This Court held that Plaintiff did state an
ERISA claim against the Individual Defendants in count II and the
Court did have supplemental jurisdiction over counts III and IV.
Board of Trustees, Sheet Metal Workers' National Pension Fund v.
Illinois Range, Inc., 186 F.R.D. 498 (N.D.Ill. 1999). Plaintiff
voluntarily withdrew its original count V, a claim for
Thereafter, Plaintiff filed a first amended complaint adding a
new count V. Count V asserts a federal common law claim for
restitution based upon unjust enrichment. The Individual
Defendants now bring a motion to dismiss the first amended
complaint. The only new issue relates to count V. Therefore, the
Court adopts its prior opinion and denies the motion to dismiss
counts II, III and IV. This opinion addresses count V.
The Court grants the motion to dismiss count V on the grounds
that no federal common law claim exists because a similar
statutory claim is available under ERISA. Alternatively, if this
Court's previous holding is reversed on appeal*fn1 and Plaintiff
is found to have no count II statutory claim under ERISA, federal
common law does not permit Plaintiff to pursue count V for
restitution based upon unjust enrichment.
I. BACKGROUND FACTS
The following facts are taken from the first amended complaint
and are treated as true only for purposes of this motion.
Illinois Range was purchased by IRC Holding in November, 1986.
The Individual Defendants owned IRC Holding. In March of 1994,
IRC Holding was valued at over $1 million. In October of 1994,
the Individual Defendants sold the stock of IRC Holding to a
company called IRC Acquisition, which later changed its name to I
Range. I Range was owned by Ken Krejaik, Robert Finnerty, Dick
Antonson and Greg Germakian (collectively the "New Owners"). I
Range executed a $2.5 million promissory note, secured by
Illinois Range's assets and stock, in favor of the Individual
Defendants. The agreement provided that Krakowiak would remain a
director of the corporation until payment of the acquisition
note. However, if Illinois Range was not profitable by at least
$1 as of one year after the sale, the stock ownership would
revert to the Individual Defendants. On April 1, 1996, the
Individual Defendants and New Owners renegotiated the stock
purchase agreement to provide for the Individual Defendants to
receive only interest payments and not principal.
Plaintiff alleges that as of the time of the stock sale of IRC
holdings in October 1994, the Individual Defendants knew or
should have known that Illinois Range was not an economically
viable entity. In 1993, Illinois Range alienated its major
customer, McDonald's Corporation. In July 1994, Illinois Range
sold its parts business to the Franks Group. In February 1994,
McDonald's notified Illinois Range that it would not continue to
use Illinois Range services. As of October 1994, withdrawal
liability was not yet due and owing.
Following the stock sale and from late 1994 through early 1996,
the Board of Directors of Illinois Range approved large
dividends, totaling approximately $6.25 million, to its sole
shareholder, IRC Holding, which approved large dividends to its
sole shareholder, I Range, which in turn approved payments of
$828,531 to the Individual Defendants in order to pay down the
acquisition note financing the stock sale.*fn2 In April of 1996,
Defendants declared the purchasers of Illinois Range in default
under the stock purchase agreement. In September of 1996,
Illinois Range assigned its assets for the benefit of creditors
and ceased contributing to the Fund. The Fund determined that as
of September 10, 1996 a complete withdrawal within the meaning of
ERISA, 29 U.S.C. § 1381(b)(2), had been effected. This resulted
in withdrawal liability in the amount of $2,273,699.86.
As a result of the dividend distributions from 1994 through
1996, Illinois Range was rendered insolvent and unable to pay its
withdrawal liability. In December 1998, the Board of Trustees of
the Sheet Metal Workers National Pension Fund filed the instant
action against the Corporate Defendants and the Individual
Defendants. Count I of the first amended complaint is a claim for
withdrawal liability against the Corporate Defendants. Count II
is a claim under ERISA against the Individual Defendants. Count
III is a claim for illegal corporate distributions against the
Individual Defendants. Count IV is a claim for fraudulent
conveyance against the Individual Defendants. Count V is a claim
for unjust enrichment under the federal common law of ERISA
against the Individual Defendants.
II. STANDARD OF REVIEW
In analyzing Plaintiff's complaint under Rule 12(b)(6), the
court must accept as true the allegations in the complaint and
all reasonable inferences that may be reasonably drawn from them.
Fed.R.Civ.P. 12(b)(6); Ogden Martin Systems of Indianapolis,
Inc. v. Whiting Corp. 179 F.3d 523 (7th Cir. 1999). A motion to
dismiss may be granted only if the court concludes that "no
relief could be granted under any set of facts that could be
proved consistent with the allegations." Hishon v. King &
Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 2232, 81 L.Ed.2d 59
III. COUNT V OF PLAINTIFF'S FIRST AMENDED COMPLAINT FAILS TO
STATE A FEDERAL COMMON LAW CLAIM.
Based upon this Court's previous holding, Plaintiff has stated
an ERISA claim against the Individual Defendants under count II.
Plaintiff may recover the dividends received by them if Plaintiff
can prove that a principal purpose of the transaction was to
evade or avoid withdrawal liability. Board of Trustees, Sheet
Metal Workers' National Pension Fund v. Illinois Range, Inc.,
186 F.R.D. 498 (N.D.Ill. 1999). Therefore, the Court grants the
Individual Defendants' motion to dismiss count V on the grounds
that no federal common law claim for unjust enrichment is needed.
Because Plaintiff has a claim and a remedy under ERISA to recover
the moneys paid to the Individual Defendants, there is no gap in
ERISA that requires the creation of a federal common law
A. Federal Common Law Claims Under ERISA
Courts are extremely reluctant to create ERISA causes of action
by implication in
addition to those enumerated in the statute. UIU Severance Pay
Trust Fund v. Local Union No. 18-U, United Steelworkers of
America, 998 F.2d 509, 512 (7th Cir. 1993). This reluctance
derives from the fact that ERISA embodies an interlocking,
interrelated, and interdependent remedial scheme, which is in
turn part of a comprehensive statute. Nachman Corp. v. Pension
Benefit Guaranty Corp., 446 U.S. 359, 361, 100 S.Ct. 1723, 1726,
64 L.Ed.2d 354 (1980). Courts are reluctant to tamper with
ERISA's enforcement scheme because it has been carefully crafted
by Congress. Massachusetts Mutual Life Insurance Co. v.
Russell, 473 U.S. 134, 145, 105 S.Ct. 3085, 3092, 87 L.Ed.2d 96
Under certain limited circumstances, it is appropriate for
courts to develop a federal common law of ERISA. UIU Severance
Pay Trust Fund, 998 F.2d at 512. In that ERISA preempts all
state law relating to employee benefit plans, 29 U.S.C. § 1144,
plaintiffs must rely upon federal common law for claims
traditionally brought under state law. Id. "The legislative
history demonstrates that Congress intended federal courts to
develop federal common law in fashioning" additional appropriate
rights under ERISA. Massachusetts Mutual Life Insurance Co. v.
Russell, 473 U.S. 134, 156, 105 S.Ct. 3085, 3097, 87 L.Ed.2d 96
(1985) (Brennan, J. concurring). As a result, courts develop
federal common law to fill the gaps.
When creating additional ERISA rights under federal common law,
the inquiry is whether the judicial creation of a right is
"necessary to fill in interstitially or otherwise effectuate the
statutory pattern enacted in the large by Congress." Plucinski
v. I.A.M. National Pension Fund, 875 F.2d 1052, 1056 (3d Cir.
1989). "[F]ederal courts should not lightly create additional
ERISA rights under the rubric of federal common law." Id. After
applying the first prong of the test determining whether the
federal common law claim is necessary, courts then ask whether
the particular cause of action furthers the purpose of ERISA.
Id. at 1057.
Courts have supplemented ERISA with federal common law
restitution claims in limited contexts. Courts have allowed
federal common law restitution actions to permit employers to
In the case of refunds for employer overpayment,
ERISA can be supplemented with the federal common law
action of restitution. A claim for restitution is
appropriate in employer refund actions since the
employer, in effect, is asking that the plan disgorge
unfair gains. Relief under federal common law in the
area of employer overpayment is consistent with the
ERISA statutory scheme.
Central States v. Howard Baer, Inc., 753 F. Supp. 241, 244
(N.D.Ill. 1991). See also, UIU Severance Pay Trust Fund, 998
F.2d at 513 ("Absent a judicially-crafted cause of action,
employers are left to the mercy of plan trustees who have no
financial incentive to return mistaken payments."); Kwatcher v.
Massachusetts Service Employees Pension Fund,