Teamsters Local Union No. 786 v. Blevins

TEAMSTERS LOCAL UNION NO. 786, Plaintiff, v. RICHARD BLEVINS, et al., Defendants.

Case No. 19 C 6317

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

October 6, 2020

Judge Joan H. Lefkow

OPINION AND ORDER

On September 23, 2019, Teamsters Local Union No. 786 ("Local 786") filed suit against the trustees of four multiemployer benefit trust funds for breach of fiduciary duty in violation of the Employee Retirement Security Act ("ERISA"). (Dkt. 1.) On October 25, 2019, Local 786 amended its complaint and asked the court to enter a preliminary injunction. (Dkts. 10, 11.) In response, on November 27, 2019, defendants moved to dismiss the amended complaint, arguing that Local 786 had failed to state a claim. (Dkt. 19.) For the reasons stated below, defendants' motion to dismiss is denied, and Local 786's motion for preliminary injunction is granted.¹

BACKGROUND²

I. The Parties

Plaintiff Local 786 is an employee organization that has represented employees in the building materials, lumber, and other industries in the Chicagoland area. (Dkt. 10 ¶ 3, 9.)

Defendants Richard Blevins, Steven Fisher, Kevin Jarchow, Dave Mashek, Martin Ozinga, IV, Mike Philipp, Edward Rizzo, Ronald Sandack, Steven Warnke, and Michael Yauger are the trustees of the following four multiemployer trust benefit funds: the Local Union 786 Building Material Pension Fund; the Building Material Chauffeurs, Teamsters & Helpers Welfare Fund of Chicago; the Lumber Employees Local 786 Retirement Fund; and the Local 786 Union Severance Trust Fund (collectively, the "786 Funds"). (Id. ¶ 3, 6-8.) Blevins, Fisher, Rizzo, and Yauger are the union trustees for each of the funds. (Id. ¶ 6-8.)

II. The Facts

Local 786 is bound by its own by-laws and by the constitution of the International Brotherhood of Teamsters ("IBT"), of which it is an affiliate. (Id. ¶ 10.) Through trust agreements, Local 786 and participating employers created and maintain the four multiemployer trust benefit funds. (Id. ¶ 11.) Each trust agreement specifies a procedure for the appointment and removal of union trustees. (Id. ¶ 12.)

Prior to February 28, 2019, the relevant trust agreements provided that Local 786's executive board would appoint and remove union trustees. Id. On February 28, 2019, however, the defendants adopted amendments to the trust agreements for all four funds, which give the incumbent union trustees the power to appoint and remove themselves. (Id. ¶ 14.) A representative example of the amended provisions is as follows³:

Any Employer Trustee may be removed, with or without cause, at any time, by a majority of the remaining Employer Trustees. Any Union Trustee may be removed, with or without cause, at any time, by a majority of the remaining Union Trustees. The Trustees may initiate action to cause the removal of a Trustee who violates the requirements of this Trust or of a law applicable to the Trust; however, the right to actually remove an Employer Trustee lies solely with the other Employer Trustees and the right to actually remove a Union Trustee lies solely with the other Union Trustees.

[...]

If any Employer Trustee shall die, become incapable of acting hereunder, resign, or be removed, a successor Employer Trustee shall be appointed promptly by action of the majority of Employer Trustees. If any Union Trustee shall die, become incapable of acting hereunder, resign, or be removed, a successor Union Trustee shall be appointed promptly by action of the majority of Union Trustees. .... It is the intention hereof that the Fund shall at all times be administered by an equal number of Employer Trustees and Union Trustees.

(Dkt. 10-7 at 15.)

On July 22, 2019, the IBT placed Local 786 into trusteeship and appointed Dennis Morgan as IBT Trustee. (Id. ¶ 16.) Pursuant to the terms of the IBT constitution, Morgan was vested with all powers of Local 786's executive board for the duration of trusteeship, including the power to appoint and remove union trustees of any benefit fund negotiated by Local 786. (Id. ¶ 17.) By letter dated July 24, 2019, Morgan notified the defendants that he was removing Blevins, Fisher, Rizzo, and Yauger as union trustees of the 786 Funds and replacing them with Thomas Conelias. (Id. ¶ 18.) By letter dated July 25, 2019, the defendants refused to accept the removal of the union trustees and the appointment of Conelias based on their February 28, 2019 amendments to the trust agreements for the funds. (Id. ¶¶ 19-20.)

On more than one occasion, Local 786 attempted to resolve this matter with the defendants to no avail. (Id. ¶ 21.) Local 786 brought this action for breach of fiduciary duty under sections 404(a)(1)(A), (B) and (D) of ERISA and filed a motion for preliminary injunctive relief to compel removal of the union trustees from the funds. (Id. ¶ 23; dkt. 11.) Defendants have moved to dismiss. (Dkt. 19.)

LEGAL STANDARD

A motion to dismiss under Rule 12(b)(6) challenges a complaint for failure to state a claim upon which relief may be granted. In ruling on a Rule 12(b)(6) motion, the court accepts as true all well-pleaded facts in the plaintiff's complaint and draws all reasonable inferencestherefrom in the plaintiff's favor. Active Disposal, Inc. v. City of Darien, 635 F.3d 883, 886 (7th Cir. 2011); Dixon v. Page, 291 F.3d 485, 486 (7th Cir. 2002). To survive a Rule 12(b)(6) motion, the complaint must not only provide the defendant with fair notice of a claim's basis but must also establish that the requested relief is plausible on its face. See Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937 (2009); Bell Atl. v. Twombly, 550 U.S. 544, 555, 127 S. Ct. 1955 (2007). The allegations in the complaint must be "enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555. At the same time, the plaintiff need not plead legal theories; it is the facts that count. Hatmaker v. Mem'l Med. Ctr., 619 F.3d 741, 743 (7th Cir. 2010); see also Johnson v. City of Shelby, 574 U.S. 10, 135 S. Ct. 346 (2014) (per curiam) ("Federal pleading rules call for a short and plain statement of the claim showing the pleader is entitled to relief; they do not countenance dismissal of a complaint for imperfect statement of the legal theory supporting the claim asserted").

The Seventh Circuit uses a two-step analysis to assess whether preliminary injunctive relief is warranted. See Girl Scouts of Manitou Council, Inc. v. Girl Scouts of USA, Inc., 549 F.3d 1079, 1085-86 (7th Cir. 2008). "In the first phase, the party seeking a preliminary injunction must make a threshold showing that: (1) absent preliminary injunctive relief, he will suffer irreparable harm in the interim prior to a final resolution; (2) there is no adequate remedy at law; and (3) he has a reasonable likelihood of success on the merits." Turnell v. CentiMark Corp., 796 F.3d 656, 661-62 (7th Cir. 2015). If the movant makes the required threshold showing, then the court moves on to the second stage and considers: "(4) the irreparable harm the moving party will endure if the preliminary injunction is wrongfully denied versus the irreparable harm to the nonmoving party if it is wrongfully granted; and (5) the effects, if any, that the grant or denial of the preliminary injunction would have on nonparties," i.e. the public interest. Id. at 662. The Court balances thepotential harms on a sliding scale against the movant's likelihood of success. Foodcomm Int'l v. Barry, 328 F.3d 300, 303 (7th Cir. 2003). The greater the movant's likelihood of success, "the less strong a showing" the movant "must make that the balance of harm is in its favor." Id.

ANALYSIS

I. Motion to Dismiss

Defendants seek to dismiss Local 786's one-count complaint for breach of fiduciary duty under ERISA, arguing that it has not pleaded sufficient facts to show that the amendments to the trust agreements, or the rejection of Conelias as the replacement union trustee, breached any fiduciary duties. Defendants also claim that their actions were in a settlor rather than a fiduciary capacity. Defendants further assert that Local 786 lacks standing to bring this claim under ERISA. Local 786 responds that the amendments to the trust agreements entrench the union trustees in their positions and were completed in a fiduciary rather than settlor capacity. Local 786 also proclaims that it has standing.

A. Standing

ERISA provides that a "civil action may be brought ... by a participant, beneficiary or fiduciary." 29 U.S.C. § 1132(a)(2). Local 786 argues that it has standing under this statute as a fiduciary. As described above, the Seventh Circuit has held that a party is a fiduciary where, among other things, it has authority to select and retain plain administrators. Leigh, 727 F.2d at 133; see also Licensed Div. Dist. 1 MEBA/NMU v. Defries, 943 F.2d 474, 477-78 (4th Cir. 1991) (finding that "a union claiming such authority [to appoint and remove] has standing to sue as a fiduciary to the extent that it challenges, as violative of ERISA or the terms of the plan, any act or practice which pertains to the appointing and replacing of trustees").

Defendants argue that following the amendments they made to the trust agreements, Local 786 no longer had authority to appoint or remove any trustees. (Dkt. 20 at 10-11.) But ofcourse it is those amendments that Local 786 is challenging. It would be perverse to permit defendants to deprive a plaintiff of standing through the very act they seek to challenge as unlawful.

Defendants also argue that the provision of ERISA under which Local 786 sues, Section 502(a)(2), provides a remedy only for losses to the plan, and that Local 786 does not plead any financial loss to the plan. (Id. at 5.) But the Seventh Circuit has held that "plaintiffs are not required to show that the trust lost money as a result of [a fiduciary's] alleged breaches of fiduciary duties." Leigh, 727 F.2d at 122; see also Mira v. Nuclear Measurements Corp., 107 F.3d 466, 472 (7th Cir. 1997) ("we...