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Bator v. The Board of Trustees of Inter-Local Pension Fund

United States District Court, N.D. Illinois, Eastern Division

June 26, 2019

DONALD BATOR, EDMOND W. MOSES, CHRISTOPHER O'MALLEY, MICHAEL ANTHONY PAPPA and ROGELIO JIMENEZ, JR. on behalf of themselves and all others similarly situated, Plaintiffs
v.
THE BOARD OF TRUSTEES OF THE INTER- LOCAL PENSION FUND of the Graphic Communications Conference of the International Brotherhood of Teamsters, LOCAL NO. 458-M GRAPHIC COMMUNICATIONS INTERNATIONAL UNION, DISTRICT COUNCIL NO. 4 GRAPHIC COMMUNICATIONS CONFERENCE OF THE INTERNATIONAL BROTHERHOOD OF TEAMSTERS, and THE INTERNATIONAL BROTHERHOOD OF TEAMSTERS, Defendants.

          MEMORANDUM OPINION AND ORDER

          John J. Tharp, Jr. United States District Judge

         The plaintiffs, former members of local union that participates in an employee benefits plan, allege that both the union and the pension plan board of trustees violated the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq. by breaching their fiduciary duties to the plan. The defendants moved to dismiss the case for lack of subject matter jurisdiction and failure to state a claim. While the plaintiffs may properly invoke federal jurisdiction, they have failed to state a claim upon which relief can be granted, so the defendants' motions are granted.

         BACKGROUND

         At issue here is the administration and alleged underfunding of the Inter-Local Pension Fund of the Graphic Communications Conference of the International Brotherhood of Teamsters (“the Fund”), a defined benefit plan designed to provide retirement and other benefits to members of participating local unions. Compl. ¶ 15. Unlike most defined benefit plans, the Fund is not collectively bargained. Rather, it is organized as a trust described in § 501(c)(18) of the U.S. Internal Revenue Code. As such, it is completely employee funded-employers do not contribute or participate in Fund governance. Id. at Ex. A. The Fund is governed by a Trust Indenture and administered by a board of trustees (the “Fund Trustees” or “Trustees”) consisting of officials from various participating unions. With respect to contribution levels, the Trust Indenture provides that members must contribute $5.00 per week unless the member's union has fixed a higher contribution amount through official action of its membership and with the approval of the Fund Trustees. Id. ¶ 37. Upon retirement, members are entitled to a monthly lifetime pension. The monthly pension amount is equal to 2% of the total amount a member contributes during their time as an employee. Id. at Ex. A, Trust Indenture 45, ECF No. 4.[1]

         Named plaintiffs Donald Bator, Edmond Moses, Christopher O'Malley, Michael Anthony Pappa, and Rogelio Jimenez, Jr. are employees of Bell Litho Inc., a graphic communications company, and former members of Local No. 458M Graphic Communications International Union, a Fund participant.[2] Notably, Local 458M's bylaws require its members to become members of the Fund and contribute to the Fund. Id. ¶ 33.

         The story begins for purposes of this motion in 2008, when Local 458M voted to increase its existing Fund contribution rate from 6% to 8% of its members' gross weekly wages.[3] Id. ¶ 39. The increase was memorialized in a contract between Bell Litho employees and Local 458M. Several years later in January 2014, the Fund notified participants that its financial health was deteriorating and sought to facilitate a membership vote to cut benefits and increase contribution rates. Id. ¶ 40. The plaintiffs and their co-workers, faced with the Fund's uncertain financial status and their compelled participation in the Fund, petitioned Local 458M leadership to reduce their contribution rate. Local 458M denied the petition, noting that “individual shops cannot change the contribution unless there is language in their contract that allows this.” Id. ¶ 44.

         When the contract between Bell Litho and Local 458M expired in 2016, the plaintiffs and their co-workers tentatively agreed to renew its terms excepting the language regarding Fund contribution rates. Local 458M refused to change the language regarding contribution rates, so the plaintiffs requested that wage deductions from their paychecks be discontinued. Local 458M responded via letter in February 2016, noting that the plaintiffs were required to make their contributions and that failure to do so could result in expulsion from the union. Id. ¶ 46. In a separate letter, it noted that Local 458M's by-laws required all its members to become members of the Fund. It also admitted, however, that certain Local 458M members working for employers other than Bell Litho, who had been brought in when Local 458M merged with a different union, were not participating in the Fund. Id. ¶¶ 46, 47. According to the Union, the Fund's Trust Indenture allows locals to participate in “segments” and the non-participating members who had been brought in pursuant to the merger belonged to such segments. Id. ¶ 50.

         By June 2016, contract negotiations between the Bell Litho employees and Local 458M had come to a standstill. In September 2016, the plaintiffs and other Bell Litho employees met with Fund Executive Director Larry Mitchell, who was unable to answer questions regarding the number of Local 458M members who contributed less than the voted upon 8% contribution rate. Id. ¶ 67. Mitchell stated that the Fund did not monitor or police the local unions; rather, it received a list of participants and contribution rates from the unions and took the unions at their word that all who were required to participate were doing so at the required rate. Id. ¶ 71.

         In November 2016, the President of Local 458M sent a letter to all Local 458M members employed by Bell Litho. The letter stated that Fund contribution levels were set by Local 458M membership and could not be changed without membership approval, and that the Bell Litho shop steward had failed in his attempts to have the Local 458M membership authorize a vote. It went on to explain that Local 458 members employed at Bell Litho would no longer be governed by any collective bargaining agreements and that their contributions to the Fund would become vested. Id. at Ex. N. According to the Trust Indenture, a member entitled to a vested benefit may not make further contributions to the Fund and is eligible for benefits upon retirement at the rate which was in effect at the time of termination of active membership. Id. at Ex. A, Trust Indenture 50.

         The plaintiffs subsequently filed a putative class action suit in this district. In Count I, the plaintiffs allege that the Fund Trustees breached their fiduciary duties in violation of ERISA by failing to enforce terms of the Trust Indenture which required local unions to apply the same contribution rate formula to all participating union members and causing the Fund to become underfunded. In Count II, the plaintiffs allege that Local 458M breached its fiduciary duties in violation of ERISA by selectively enforcing its bylaws. Counts III and IV allege state law breach of contract and common law fraud theories against Local 458M. Both the Fund Trustees and the Union filed motions to dismiss for failure to state a claim; the Trustees also argue that the Court lacks subject matter jurisdiction to hear the claim asserted in Count I.

         DISCUSSION

         A motion to dismiss brought pursuant to Federal Rule of Civil Procedure 12(b)(6) should be granted if the complaint fails to state a claim to relief that is plausible on its face. Ashcroft v. Iqbal, 556 U.S. 662 (2009). When considering a Rule 12(b)(6) motion, courts must accept the facts alleged in the complaint as true and draw all reasonable inferences in the plaintiff's favor. Tamayo v. Blagojevich, 526 F.3d 1074, 1081 (7th Cir. 2008). The standard is the same for a motion to dismiss for lack of Article III standing-a complaint must allege facts which plausibly support the invocation of subject matter jurisdiction. Silha v. ACT, Inc., 807 F.3d 169, 174 (7th Cir. 2015) (“[W]hen evaluating a facial challenge to subject matter jurisdiction under Rule 12(b)(1), a court should use Twombly-Iqbal's ‘plausibility' requirement.”) (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) and Iqbal, 556 U.S. 662 (2009)).

         I. Count I: Fund Trustees

         The Fund Trustees argue in their motion to dismiss that the plaintiffs failed to allege a plausible violation of ERISA and failed to demonstrate Article III standing. Because constitutional standing to sue is a threshold jurisdictional question, see Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 102 (1998), the Court addresses that issue first.

         A. ...


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