Pension Benefit Guar. Corp. v. UForma/Shelby Bus. Forms, Inc., Case No. 1:13-cv-266

PENSION BENEFIT GUARANTY CORP., Plaintiff, v. UFORMA/SHELBY BUSINESS FORMS, INC., et al., Defendants.

Case No. 1:13-cv-266

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF OHIO WESTERN DIVISION

Date: January 21, 2014

Dlott, J.

Litkovitz, M.J.

REPORT AND

RECOMMENDATION

This matter is before the Court on the motion to dismiss of defendants 2840 Sprouse Drive, 10001 Alliance Road, and 2322 Clifton Avenue (collectively the Property defendants) and Samuel L. Peters, LLC and Peters Ohio, LLC (collectively the LLC defendants) (Doc. 19), plaintiff's response in opposition (Doc. 29), and the Property and LLC defendants' reply memorandum. (Doc. 30).

I. Factual and Procedural Background

Plaintiff, Pension Benefit Guaranty Corporation (PBGC), brings this action under the Employment Retirement Income Security Act (ERISA), 29 U.S.C. § 1001, et seq., against defendants¹ to collect unfunded benefit liabilities and unpaid pension insurance premiums and termination premiums. PBGC alleges its ERISA claims arise due to the termination of two pension plans: the Uforma/Shelby Business Forms, Inc. Hourly Employees' Retirement Plan (the Hourly Plan) and the Uforma/Shelby Business Forms, Inc. Salaried Employees' Retirement Plan (the Salaried Plan). PBGC also brings this action under 29 U.S.C. § 1368 to enforce the statutory liens against the Hourly Plan and the Salaried Plan for unfunded benefits liabilities.(Doc. 1).

By way of background, PBGC is a wholly owned United States government corporation established under 29 U.S.C. § 1302(a) to administer and enforce the pension plan termination insurance program established by Title IV of ERISA. PBGC generally becomes a trustee of a pension plan when the plan terminates without sufficient assets to pay benefits. Subject to certain statutory limitations, PBGC pays the plan's unfunded benefits from PBGC's insurance funds. ERISA provisions provide that on the plan termination date, a contributing sponsor of a pension plan and members of the contributing sponsor's "controlled group" incur joint and several liability to PBGC for the total amount of the plan's unfunded benefit liabilities, unpaid pension insurance premiums, termination premiums, and accrued interest. In the event any liable party neglects or refuses to pay PBGC, a lien arises in the amount of liability.

Here, PBGC alleges that Uforma established two pension plans in June 1979: the Hourly Plan and the Salaried Plan. Uforma was the contributing sponsor of both plans which are covered by the pension plan termination insurance program established under Title IV of ERISA. On January 12, 2010, PBGC issued notices to Uforma of its determination that the plans should be terminated. PBGC and Uforma entered into an agreement on April 15, 2010, that the plans were terminated as of March 31, 2006. PBGC alleges that as of March 31, 2006, either Samuel L. Peters or the Trust of Samuel L. Peters owned the Property defendants. (Doc. 1, ¶¶ 21-26, 35-37).

The Property and LLC defendants now seek to have PBGC's claims against them dismissed under Rules 9(a), 12(b)(5), and 12(b)(6) of the Federal Rules of Civil Procedure.² These defendants assert that the claims against the Property defendants must be dismissed asthey are real property tracts and not entities capable of being sued. Further, both the Property and LLC defendants³ contend that PBGC's claims against them are barred by the pertinent statute of limitations. For the following reasons, the Court recommends that the motion to dismiss be granted.

II. Standards of Review under Rules 9(a), 12(b)(5), and 12(b)(6)

Federal Rule of Civil Procedure 9 provides, in pertinent part:

When a party desires to raise an issue as to . . . the capacity of any party to sue or be sued or the authority of a party to sue or be sued, the party desiring the issue shall do so by specific negative averment, which shall include such supporting particulars as are peculiarly within the pleader's knowledge.

Fed. R. Civ. P. 9(a). Whether an entity has the capacity to be sued in federal court is governed by Fed. R. Civ. P. 17(b), which provides in relevant part that for all parties not an individual or corporation, capacity is determined " bythe law of the state where the court is located. . . ." Fed. R. Civ. P. 17(b)(3). See also Hendricks v. Office of Clermont Cty Sheriff, No. 1:03-cv-572, 2006 WL 2850515, at *3 (S.D. Ohio Sept. 29, 2006) (applying Ohio law in determining whether defendant had capacity to be sued). In raising the defense of capacity, defendant bears the burden of showing by "specific negative averment [and] supporting particulars" that it is not an entity capable of being sued. Fed. R. Civ. P. 9(a).

Rule 12(b)(5) provides that an action may be dismissed for "insufficient service of process." Fed. R. Civ. P. 12(b)(5). Generally, the plaintiff bears "the burden of establishing [the service's] validity." Metro. Aloys Corp. v. State Metals Indus., Inc., 416 F. Supp.2d 561, 563 (E.D. Mich. 2006). Courts may look to "record evidence" and "uncontroverted affidavits" in determining whether plaintiffs have met this burden. Id.

To survive a motion to dismiss under Fed. R. Civ. P. 12(b)(6), plaintiff's complaint "must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face."' Ashcroft v. Iqbal, 566 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombfy, 550 U.S. 544, 570 (2007)). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. (citing Twombfy, 550 U.S. at 556). The Court must accept all well-pleaded factual allegations as true but need not "accept as true a legal conclusion couched as a factual allegation." Twombfy, 550 U.S. at 555 (quoting Papasan v. Allain, 478 U.S. 265, 286 (1986)). While a complaint need not contain "detailed factual allegations," it must provide "more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Iqbal, 566 U.S. at 678 (citing Twombfy, 550 U.S. at 555). A pleading that offers "labels and conclusions" or "a formulaic recitation of the elements of a cause of action will not do." Twombfy, 550 U.S. at 555. Nor does a complaint suffice if it tenders "naked assertion[s]" devoid of "further factual enhancement." Id. at 557.

Additionally, a court may consider exhibits attached to the complaint or motion to dismiss under certain circumstances. Amini v. Oberlin College, 259 F.3d 493, 502 (6th Cir. 2001) (citing Nieman v. NLO, Inc., 108 F.3d 1546 (6th Cir. 1997)). Though, generally, a court may not consider matters outside of the pleadings when ruling on a motion to dismiss without converting it into a Rule 56 motion for summary judgment, "[d]ocuments that a defendant attaches to a motion to dismiss are considered part of the pleadings if they are referred to in the plaintiff's complaint and are central to [the plaintiff's] claim." Weiner v. Klais & Co., 108 F.3d 86, 89 (6th Cir. 1997) (quoting Venture Assocs. Corp. v. Zenith Data Sys. Corp., 987 F.2d 429, 431 (7th Cir. 1993)).

With these principles in mind, the Court reviews PBGC's complaint.

III. Resolution

A. The Property defendants are not properly named defendants.

Defendants⁴ argue that PBGC has improperly named the Property defendants and aver that 2840 Sprouse Drive and 10001 Alliance Road are pieces of real estate. (Doc. 19 at 7, citing Doc. 19, Ex. 1, ¶¶ 1-2, Declaration of Samuel L. Peters).⁵ Defendants assert that 2840 Sprouse Drive is real property in Henrico County, Virginia that Samuel L. Peters conveyed to Samuel L. Peters, LLC on December 2, 2010. See Doc. 19, Ex. 1 at 9-13, Commonwealth of Virginia Land Record Instruments. Defendants further assert that 10001 Alliance Road is real property in Hamilton County, Ohio that Samuel L. Peters conveyed to Peters Ohio, LLC on December 2, 2010. See Doc. 19, Ex. 1 at 4-8, State of Ohio and Commonwealth of Kentucky Land Record Instruments. Defendants aver that 2322 Clifton Avenue is real estate that was sold by Samuel L. Peters on August 3, 2011. (Doc. 19 at 7). Defendants argue that although PBGC refers to these properties as "trades or businesses" operated by Ohio LLCs in the complaint, see Doc. 1, ¶¶ 12-16, they are not legal entities under Ohio law and are therefore improperly named as defendants. In support, defendants cite to Patterson v. V & M Auto Body, 589 N.E.2d 1306 (Ohio 1992), where the Ohio Supreme Court held that a sole proprietorship was improperly named as adefendant as it had "no legal identity separate from that of the individual who owns it." Id. at 1308. Defendants argue that because the properties named by PBGC here have no legal identity separate from those of Samuel L. Peters or limited liability companies, they are not legal entities with the capacity to be sued under Patterson, regardless of whether they are characterized as "trades or businesses" by PBGC. (Doc. 19 at 9). Defendants thus assert PBGC's claims against the Property defendants must be dismissed under Rule 9(a).

In this same vein, defendants maintain that the properties cannot be sued as they are not capable of being served with process under Ohio law. Defendants rely on Ohio Rule of Civil Procedure 4.2, which provides a complete list of legal entities that may be served; properties are not included in this list. See Doc. 19 at 9-10, citing Ohio Civ. R. P. 4.2. Defendants further argue that because this is not an in rem action, the properties are incapable of being sued. (Doc. 19 at 10, citing Shaffer v. Heitner, 433 U.S. 186, 196 (1977) (noting that "in rem jurisdiction is traditionally based on attachment or seizure of property. . . .")). Defendants thus contend that because this action is not recognized as an in rem action by the State of Ohio, dismissal of PBGC's claims against the Property defendants is warranted under Rule 12(b)(5) for failure to effect proper service. (Id., citing Ohio...