United States District Court, N.D. Illinois, Eastern Division
BOARD OF TRUSTEES OF THE AUTOMOBILE MECHANICS' LOCAL NO. 701 UNION AND INDUSTRY PENSION FUND, Plaintiff,
MAUREEN A. JOYCE, an Individual; MARY J. GLEASON, Judge Harry D. Leinenweber Individually and in her capacity as the Trustee of the 1999 Mary J. Gleason Trust; and THE 1999 MARY J. GLEASON TRUST, a Trust organized under the laws of the State of Illinois, Defendants.
MEMORANDUM OPINION AND ORDER
HARRY D. LEINENWEBER, District Judge.
Before the Court is Defendants' Motion to Dismiss [ECF No. 14]. For the reasons stated herein, the Motion is denied.
The following facts are contained in Plaintiff Board of Trustees' (the "Board") Complaint and are presumed true for purposes of deciding the motion to dismiss, though the Court notes that neither party's briefing provides a clear statement of the facts. As far as the Court can tell, Defendant Maureen Joyce is the President and majority shareholder of a company called Joyce Ford, Inc. ("Joyce Ford"). Maureen Joyce is also the President and sole owner of a company called the 2401 So. Michigan Building Corporation (the "Building Corporation"). Defendant Mary Gleason is Maureen Joyce's mother and the Trustee of the 1999 Mary J. Gleason Trust. The Board is the administrator and sponsor of the Automobile Mechanics' Local No. 701 Union and Industry Pension Fund (the "Fund").
This case arises out of ERISA withdrawal liability Joyce Ford incurred in 2012. Joyce Ford was a party to a collective bargaining agreement that required contributions to the Fund. In April 2012, the Fund determined that Joyce Ford effected a "complete withdrawal" from the Fund for ERISA purposes, resulting in withdrawal liability in the amount of $351, 854.00. Joyce Ford apparently failed to pay this amount, prompting the Fund to file a lawsuit against Joyce Ford. The Fund also sued the Building Corporation, presumably hoping to satisfy any judgment with assets held by the Building Corporation.
In that litigation, Maureen Joyce stated during a deposition that her Building Corporation was the sole owner of a certain piece of real property in Chicago (the "Chicago Property"). The Fund eventually moved for and won summary judgment against Joyce Ford and the Building Corporation in the amount of approximately $420, 000.
According to the Complaint, Maureen Joyce came up with a plan to avoid having to pay the summary judgment award through the use of two sham transactions. First, Maureen, as the owner of the Building Corporation, executed a promissory note in which the Building Corporation promised to pay $450, 000 to the Mary J. Gleason Trust. Second, in return for receiving the promissory note, the Building Corporation offered its Chicago Property as collateral to secure the alleged debt, and to that end the Gleason Trust recorded a mortgage against the Chicago Property. The promissory note contains no schedule of payments, and the Gleason Trust provided no consideration for the note. To date, the Building Corporation has not made any payments toward the purported debt. The Board argues that these transactions were a thinly veiled attempt to make the Building Corporation and Joyce Ford judgment-proof by encumbering the sole asset that was valuable enough to satisfy the judgment.
The Board's Complaint contains three counts. The first count alleges that Defendants evaded and avoided ERISA withdrawal liability under 29 U.S.C. § 1392(c). The second count alleges fraud in fact under the Illinois Uniform Fraudulent Transfer Act ("IUFTA"), and the third count alleges fraud in law under the IUFTA. Defendants have moved to dismiss, arguing that neither ERISA nor the IUFTA authorizes the remedies the Board seeks.
II. LEGAL STANDARD
A motion to dismiss for failure to state a claim under Rule 12(b)(6) challenges the legal sufficiency of a complaint. Hallinan v. Fraternal Order of Chi. Lodge No. 7, 570 F.3d 811, 820 (7th Cir. 2009). A complaint must contain "enough facts to state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). When considering a Rule 12(b)(6) motion to dismiss, a court must accept the plaintiff's allegations as true, and view them in the light most favorable to the plaintiff. Meriwether v. Faulkner, 821 F.2d 408, 410 (7th Cir. 1987). A court need not accept as true "legal conclusions, or threadbare recitals of the elements of a cause of action, supported by mere conclusory statements." Brooks v. Ross, 578 F.3d 574, 581 (7th Cir. 2009) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)) (internal quotations and alterations omitted).
The Board's Complaint contains three counts, but each count seeks the same relief: that the Court "void and disregard the Promissory Note and Mortgage" and order the sale of the Chicago Property to satisfy Joyce Ford's ERISA withdrawal liability. Count I of the Board's Complaint alleges that Defendants tried to "evade or avoid liability" as described in § 1392 of ERISA. Count II alleges that Defendants created the promissory note and mortgage with the actual intent to hinder and defraud creditors in violation of the IUFTA. See, 740 ILCS 160/5(a)(1). Count III alleges that the Building Corporation violated the IUFTA by encumbering the Chicago Property without receiving "reasonably equivalent value in exchange for the... obligation" in order to avoid satisfying a debt, i.e., the withdrawal liability. See, 740 ILCS 160/5(a)(2).
Starting with Count I, under § 1392(c), "[i]f a principal purpose of any transaction is to evade or avoid liability under this part, this part shall be applied (and liability shall be determined and collected) without regard to such transaction." 29 U.S.C. § 1392(c). This section was added to ERISA by the Multiemployer Pension Plan Amendments Act of 1980 and "was designed to ensure that employers live up to the obligations they owe to the pension fund and to the employees who participate in it.'" Cent. States, Se. and Sw. Areas Pension Fund v. TAS Inv. Co., No. 11-cv-2991, 2013 WL 1222042, at *12 (N.D. Ill. Mar. 25, 2013) (quoting Chi. Truck Drivers, Helpers & Warehouse Workers Union (Indep.) Pension Fund v. El Paso CGP Co., 525 F.3d 591, 596 (7th Cir. 2008)). The section was added to combat the temptation for employers who have "substantial pension liabilities... to shirk their obligations through deceptive transactions." Id. (internal quotation marks omitted). When an employer violates § 1392(c), "liability will be determined as if the transaction to evade or avoid liability never occurred, and a plaintiff can reach those assets that were transferred in order to evade or avoid liability, as well as the parties to whom they were improperly transferred. '" Id. (quoting Bd. of Trustees, Sheet Metal Workers' Nat'l Pension Fund v. Ill. Range, 186 F.R.D. 498, 502 (N.D. Ill. 1999)).
To state properly an "evade or avoid" claim, the Board must allege (1) the consummation of a transaction that allows Defendants to evade or avoid withdrawal liability, and (2) that a principal purpose of the transaction was to evade or avoid withdrawal liability. Ill. Range, 186 F.R.D. at 503. In addition to satisfying Rule 12(b)(6) standards, evade and avoid claims are subject to the heightened pleading standard for fraud ...