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Laborers' Pension Fund and v. Safe Environmental Corporation

May 3, 2013

LABORERS' PENSION FUND AND LABORERS' WELFARE FUND OF THE HEALTH AND WELFARE DEPARTMENT OF THE CONSTRUCTION AND GENERAL LABORERS' DISTRICT COUNCIL OF CHICAGO AND VICINITY, AND JAMES S. JORGENSEN, ADMINISTRATOR OF THE FUNDS, PLAINTIFFS,
v.
SAFE ENVIRONMENTAL CORPORATION, AN INDIANA CORPORATION ALSO D/B/A SAFE ) ENVIRONMENTAL CORP. OF INDIANA, CORP. OF INDIANA, AND RICK LOVELACE, INDIVIDUALLY, DEFENDANTS.



The opinion of the court was delivered by: Charles P. Kocoras, District Judge:

MEMORANDUM OPINION

This matter comes before the Court on the motion of Defendants Safe Environmental Corporation ("Safe") and Rick Lovelace ("Lovelace") (collectively "Defendants") to dismiss the complaint of Plaintiffs Laborers' Pension Fund and Laborers' Welfare Fund of the Health and Welfare Department of the Construction and General Laborers' District Council of Chicago and Vicinity (the "Funds") and James S. Jorgensen ("Jorgensen"), Administrator of the Funds (collectively "Plaintiffs") pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). For the reasons set forth below, Defendants' motion to dismiss is denied.

BACKGROUND*fn1

On or about September 17, 2012, Safe, an Indiana corporation d/b/a Safe Environmental Corp. of Indiana, entered into an installment note (the "Note") to pay certain amounts owed to the Funds pursuant to a settlement agreement. Lovelace, the owner of Safe, signed a guaranty of payment and indemnification agreement (the "Guaranty"). Plaintiffs now claim that the Note is in default because Safe failed to stay current on the submission of monthly contributions reports. Plaintiffs seek a judgment against Defendants for the amounts due on the Note, including unpaid contributions, interest, liquidated damages, and Plaintiffs' attorneys' fees and costs. Plaintiffs also seek to compel Defendants to submit and pay current reports and contributions for the period of August 2012 to the present, and to submit Safe's books and records to an audit on demand to determine benefit contribution compliance. Plaintiffs further seek to compel Defendants to submit dues that should have been but were not withheld from the wages of employees performing covered work from November 2012 to the present. On February 4, 2013, Defendants filed a motion to dismiss the complaint pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6) for lack of subject-matter jurisdiction and failure to state a claim upon which relief may be granted, respectively.

Safe entered into a collective bargaining agreement ("the Agreement") with the Construction and General Laborers' District Council of Chicago and Vicinity (the "Union"). The Agreement requires Safe to make contributions on behalf of its covered employees for pension, health and welfare benefits, affiliated funds, and to submit monthly remittance reports identifying the covered employees and the amount of contributions to be remitted for each employee. Contributions which are not submitted in a timely fashion are assessed a twenty percent liquidated damages penalty plus interest. The Funds have been duly designated to act as collection agents for the Union and eleven other affiliated funds (the "Affiliated Funds"). Jorgensen is the Administrator of the Funds and has been duly authorized to act on their behalf in the collection of employer contributions and dues.

Plaintiffs filed a three count complaint on January 10, 2013. Count I asserts a breach of contract claim with respect to the Note. Count II seeks recovery for unpaid contributions under the Agreement. Count III seeks recovery for unpaid union dues under the Agreement. Plaintiffs seek recovery pursuant to Sections 502(e)(1) and (2) and 515 of the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended, 29 U.S.C. §§ 1132(c)(1) and (2) and 1145, as well as Section 301(a) of the Labor Management Relations Act of 1947 ("LMRA"), as amended, 29 U.S.C. §185(a).

LEGAL STANDARD

Under Rule 12(b)(1), the plaintiff bears the burden of establishing that the Court has jurisdiction over its claims. United Phosphorous, LTD. v. Angus Chem. Co., 322 F.3d 942, 946 (7th Cir. 2003). The Court may consider matters outside of the complaint in ruling on a motion to dismiss for lack of subject-matter jurisdiction. Ezekiel v. Michel, 66 F.3d 894, 897 (7th Cir. 1995).

A Rule 12(b)(6) motion to dismiss tests the legal sufficiency of the complaint. Sabo v. Bridgeport Machs., Inc., 249 F.3d 672, 675 (7th Cir. 2001). The allegations in a complaint must set forth a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). A plaintiff need not provide detailed factual allegations and merely must provide enough factual support to raise his right to relief above a speculative level. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). A claim must be facially plausible, meaning that the pleadings must allow the court to draw the reasonable inference that the defendant is liable for the purported misconduct. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

DISCUSSION

I. Motion to Dismiss under Rule 12(b)(1)

A. Count I (Default of Note)

Defendants assert that the Court lacks jurisdiction to entertain Count I because it is a breach of contract claim that is not rooted in any federal question but rather is an issue of state law. Plaintiffs contend that this Court should adjudicate Count I pursuant to the Court's supplemental jurisdiction. See 28 U.S.C. § 1367.

Under 28 U.S.C. ยง 1367(a), "district courts shall have supplemental jurisdiction over all other claims that are so related that they form part of the same case or controversy under Article III of the United States Constitution." "[F]ederal courts may exercise supplemental jurisdiction over a state claim if the state and federal claims 'derive from a common nucleus of operative fact'[.]" Hansen v. Bd. of Trs. of Hamilton S.E. ...


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