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NL INDUSTRIES, INC. v. LIAM VENTURES

August 18, 2005.

NL INDUSTRIES, INC, for itself and as assignee of Meta Knous, Plaintiff,
v.
LIAM VENTURES, INC., f/k/a FARLEY METAL, INC., Defendant.



The opinion of the court was delivered by: ROBERT GETTLEMAN, District Judge

MEMORANDUM OPINION AND ORDER

In its three-count first amended complaint,*fn1 plaintiff NL Industries, Inc. ("NL Industries"), for itself and as assignee of Meta Knous ("Knous"), alleges that defendant Liam Ventures, Inc. ("Liam") has refused to pay health and medical care benefits to Knous. Counts I and II assert state-law claims for breach of contract and indemnity, respectively, and Count III asserts a claim under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1101 et seq.

Defendant has moved to dismiss Count III*fn2 for lack of subject matter jurisdiction pursuant to Fed.R.Civ.P. 12(b)(1), arguing that plaintiff has not alleged the existence of an ERISA plan. For the reasons stated below, the court denies defendant's motion to dismiss. FACTS

  Plaintiff NL Industries, a New Jersey corporation, is a successor of Doehler-Jarvis, which employed Jerry Knous at the time he died in a workplace accident in 1974. Jerry Knous's widow, Meta Knous ("Knous"), began receiving benefits in April 1974. According to plaintiff, as part of its employee benefits program in 1974, Doehler-Jarvis provided free lifetime health and medical care benefits to the surviving widow of an employee. Knous assigned her rights to plaintiff pursuant to a written agreement dated November 12, 2004.

  Defendant Liam, a Delaware corporation, is the successor in interest to Farley Metals, Inc. ("FMI"). In 1982, plaintiff and FMI entered into a transfer of assets agreement ("Assets Agreement") and an assumption agreement ("Assumption Agreement"), which transferred the assets of plaintiff's division that included Doehler-Jarvis to FMI, FMI agreed to assume plaintiff's liabilities concerning employee benefits and to continue the collective bargaining agreements in effect at the time of purchase. According to defendant, payments to Knous since 1974 were made pursuant to a worker's compensation settlement reached after her husband's death, and not pursuant to an employee benefit plan. From the time FMI purchased Doehler-Jarvis in 1982 until 1992, FMI and its successor, defendant, provided free health and medical care benefits to Knous.

  In or about 1992, defendant was placed into involuntary bankruptcy. During the bankruptcy proceedings defendant moved to terminate its obligations with respect to its retiree plan. Participants in the retiree plan and the United Auto Workers ("UAW") brought a class action suit against defendant. The class action was settled, and defendant agreed to create a new retiree health plan for the group of UAW retirees and their surviving spouses ("1993 Plan") that included Knous. Under the 1993 Plan, for the first time, participants were required to pay a share of the monthly premiums. Knous filed an objection to a proposed class settlement, arguing that she was entitled to free lifetime benefits.

  In a letter dated November 11, 1992, from counsel for the bankruptcy class to counsel for FMI, class counsel states that counsel for FMI had made certain statements "on the record" regarding Knous, including that: (1) she is a class member and thus entitled to participate in the settlement; (2) FMI has assumed plaintiff's responsibility "for any agreement previously made with Ms. Knous arising from the worker's compensation settlement"; and (3) if it is determined that Knous was promised "something in addition to the rights she had under the [CBA]," FMI will waive the monthly contributions. From 1992 through 2002, FMI provided Knous with free health and medical care benefits.

  In June 2001, defendant, struggling financially, entered into an agreement with UAW under which the 1993 Plan was terminated effective December 31, 2002. During a hearing before Judge Baylson of the District Court of the Eastern District of Pennsylvania on December 20, 2002, regarding a joint motion by FMI and UAW to modify the class settlement agreement, counsel for FMI stated that Knous had filed the only objection to the settlement. FMI's counsel represented that Knous objected on the basis that pursuant to a separate legal agreement with NL Industries, which was assumed by Liam, she is entitled to coverage at no cost. Counsel further stated that Liam "acknowledges" that it has "some form of legal obligation to her," and that at "the very minimum, she will be allowed obviously to participate in the benefits of the new plan." The 1993 Plan was subsequently replaced by a UAW controlled and managed plan ("UAW Plan"), which provided reduced benefits and required a monthly contribution. Knous elected not to participate in the UAW plan. Defendant ceased providing medical benefits to Knous, and did not pay her monthly premiums.

  On May 6, 2004, counsel for Knous contacted plaintiff and stated that if defendant did not fulfill its obligations to provide Knous with free health and medical care benefits, Knous would sue plaintiff and defendant. On June 2, 2004, Knous filed suit against plaintiff and defendant in the District Court for the Northern District of Ohio, Case No. 04 CV 7342. Knous asserted a claim under § 502(e) of ERISA, alleging that plaintiff and defendant had violated their obligations to pay the full cost of health care coverage for the rest of her life. Before and after Knous filed suit in Ohio plaintiff demanded that defendant defend and indemnify plaintiff from Knous's ERISA lawsuit, but defendant refused. Plaintiff informed defendant that it had entered into settlement negotiations with Knous, but defendant did not meaningfully participate in the settlement discussions. Plaintiff settled Knous's Ohio ERISA lawsuit, and agreed to provide her with health and medical benefits, attorneys fees as provided by ERISA, and pay for the insurance coverage she procured after defendant terminated its coverage. The actuarially determined, present cash value of the settlement, plus additional costs, is approximately $329,200.00.

  STANDARD

  Rule 12(b)(1) motions are premised on either facial or factual attacks on jurisdiction. Villasenor v. Industrial Wire & Cable, Inc., 929 F. Supp. 310, 311 (N.D. Ill. 1996). If the defendant makes a factual attack on the plaintiff's assertion of subject matter jurisdiction, it is proper for the court to look beyond the jurisdictional allegations in the complaint and "view whatever evidence has been submitted on the issue to determine whether in fact subject matter jurisdiction exists." Capitol Leasing Co. v. F.D.I.C., 999 F.2d 188, 191 (7th Cir. 1993) (per curiam); Barnhart v. United States, 884 F.2d 295, 296 (7th Cir. 1989). The Supreme Court has held that an attempt to plead a federal claim fails only where it "clearly appears to be immaterial and made solely for the purpose of obtaining jurisdiction or where such a claim is wholly insubstantial and frivolous." Bell v. Hood, 327 U.S. 678, 682-83 (1946).

  DISCUSSION

  Count III of plaintiff's amended complaint asserts an ERISA claim as Knous's assignee. Defendant argues that Count III should be dismissed pursuant to Rule 12(b)(1) because plaintiff has failed to allege the existence of an ERISA-governed plan. "[T]he existence of an `ERISA-governed plan' is an essential precursor to federal jurisdiction." Cvelbar v. CBI Illinois Inc., 106 F.3d 1368, 1373 (7th Cir. 1997), abrogated on other grounds not relevant here by International Union of Operating Engineers, Local 150, AFL-CIO v. Rabine, 161 F.3d 427, 430 (7th Cir. 1998). For the reasons discussed below, plaintiff has sufficiently alleged an ERISA plan.

  Plaintiff clarifies in its response that Knous's lifetime benefits were "provided by her husband's employer as part of [a] collective bargaining agreement [("CBA")]" in effect in 1974, which plaintiff asserts was an employee welfare benefit plan within the meaning of ERISA. Pursuant to the Assets Agreement and the Assumption Agreement defendant assumed the obligations under this plan. As the Seventh Circuit has noted, retiree benefits may be granted by a CBA or under the summary plan documents for an ERISA plan, Bland v. Fiatallis North America, Inc., 401 F.3d 779, 784 (7th Cir. 2005), and ERISA plans are often adopted pursuant to the terms of a CBA. See, e.g., Inter-Modal Rail Employees Ass'n v. Atchison, Topeka and Santa Fe Ry. Co., 520 U.S. 510, 513 (1997). Although plaintiff does not provide a copy of the CBA in effect in 1974, it attaches a page of a document titled "Summary of Pension Plan, Insurance Program, Supplemental Unemployment Benefits Plan" established by agreement between Doehler-Jarvis and the UAW ("Summary"). The page contains a portion of Section 3(d), "For Surviving Spouses," which states, "The Company will make monthly contributions for hospital-surgical-medical coverages on behalf of the surviving spouse of an active employee and that spouse's eligible ...


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