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Munsey v. Tactical Armor Products

September 25, 2008

VICKIE MUNSEY, ET AL., PLAINTIFFS,
v.
TACTICAL ARMOR PRODUCTS, INC., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Thomas A. Varlan United States District Judge

(VARLAN/SHIRLEY)

MEMORANDUM AND ORDER

This civil action is before the Court on plaintiffs' Motion to Amend [Doc. 20]. Defendants have responded in opposition [Docs. 28; 36] and plaintiffs have filed a reply [Doc. 29]; thus, the motion is now ripe for determination. The Court has carefully reviewed the motion and responsive filings in light of the applicable law. For the reasons set forth herein, plaintiffs' Motion to Amend [Doc. 20] will be granted in part and denied in part.

I. Standard of Review

Plaintiffs seek to amend their complaint after the time for doing so as a matter of course has expired and therefore require the Court's leave. Leave to amend "shall be freely given when justice so requires." Fed. R. Civ. P. 15(a). The rationale for this liberal policy is to allow disputes to be resolved on the merits and not as a result of technical objections to the pleadings. Marks v. Shell Oil Co., 830 F.2d 68, 69 (6th Cir. 1987). The Supreme Court has stated that leave to amend should be granted under Rule 15(a) unless there is "undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, [or] futility of amendment." See Foman v. Davis, 371 U.S. 178, 182 (1962).

A motion for leave to amend may be denied for futility "if the court concludes that the pleading as amended could not withstand a motion to dismiss." Midkiff v. Adams County Reg'l Water Dist., 409 F.3d 758, 767 (6th Cir. 2005) (citing Martin v. Associated Truck Lines, Inc., 801 F.2d 246, 249 (6th Cir. 1986)). A motion to dismiss should not be granted unless, taking all well-pleaded allegations as true and construing them in the light most favorable to the non-moving party, there are not sufficient facts to make out all material elements of the claims. Trezbuckowski v. City of Cleveland, 319 F.3d 853, 855 (6th Cir. 2003); Weiner v. Klais & Co., Inc., 108 F.3d 86, 88 (6th Cir. 1997). In order to survive a motion to dismiss for failure to state a claim, a complaint must contain allegations supporting all material elements of the claims. Bishop v. Lucent Techs., Inc., 520 F.3d 516, 519 (6th Cir. 2008). "Conclusory allegations or legal conclusions masquerading as factual allegations will not suffice." Bishop, 520 F.3d at 519 (quoting Mezibov v. Allen, 411 F.3d 712, 716 (6th Cir. 2005)).

II. Relevant Facts

Plaintiffs assert claims for benefits allegedly due under a health insurance policy issued by Cariten Health Care to plaintiffs' former employer and defendant, Tactical Armor Products, Inc. Cariten issued the policy pursuant to defendant Tactical Armor Products, Inc.'s group health insurance plan. Through their various pleadings, the parties agree that the plan is an employee welfare benefit plan as defined in the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001, et seq., and that plaintiffs were qualified participants under the plan.

Plaintiffs allege that as part of the plan, defendants withheld money from plaintiffs' paychecks for the purpose of paying certain health insurance premiums to Cariten during the period of May 30, 2006 through September 1, 2006. Plaintiffs allege that defendants stopped paying the health insurance premiums though they continued to deduct sums of money from plaintiffs' pay checks for the alleged purpose of paying the premiums. Plaintiffs allege defendants continued to represent to plaintiffs that they were deducting the money in order to provide health insurance coverage. Plaintiffs allege that instead of using the funds to pay the insurance premiums, defendants commingled the funds they collected into their personal accounts and converted the funds for their personal use.

Due to defendants' failure to pay the premiums, Cariten terminated plaintiffs' health care coverage effective June 1, 2006. Plaintiffs were informed of this termination in August 2006 by a letter from Cariten. Plaintiffs allege that as a result of defendants' actions, they have lost actual money paid for the alleged health insurance coverage, incurred various medical expenses and costs, and are and were not able to get health insurance because of the lapse in coverage.

III. Analysis

Defendants contend that the twelve causes of action stated in the proposed amended complaint are futile and should be denied as a matter of law. Though the Court notes that the form of plaintiffs' pleadings are not ideal in that they do not specify which factual allegations support each claim, this technical failure is not determinative. Therefore, the Court will address each of plaintiffs' claims in turn and consider whether plaintiffs allege sufficient facts to support each allegation throughout the entirety of the complaint.

A. ERISA Claims

1. Count I

Count I of the proposed amended complaint alleges that defendants are liable for their actions pursuant to § 502 of ERISA, 29 U.S.C. § 1132. Section 502 permits an ERISA plan participant to bring a civil action against a fiduciary for benefits under the plan or to otherwise enforce rights under the plan. 29 U.S.C. § 1132; see also Thurman v. Pfizer, Inc., 484 F.3d 855, 860 (6th Cir. 2007); Mertens v. Hewitt Assocs., 508 U.S. 248, 252-53 (1993). ERISA defines fiduciary as someone who has "any discretionary authority or discretionary control respecting management [or] the administration" of the plan or has "any authority or control respecting management or disposition of [the plan] assets." ERISA § 3(21)(A), 29 U.S.C. § 1002(21)(A).

Multiple courts have held that an employer who has control over amounts withheld from employees' paychecks for the purpose of paying ERISA plan premiums is a fiduciary. See, e.g., Trs. of the Graphic Commc'ns Int'l Union v. Bjorkedal, 516 F.3d 719, 732 (8th Cir. 2008); In re Bucci, 493 F.3d 635, 643 (6th Cir. 2007) (citing Iron Workers' Local No. 25 Pension Fund v. McGuire Steel Erection, Inc., 353 F. Supp. 2d 794 (E.D. Mich. 2004)); Phelps v. C.T. Enters., Inc., 394 F.3d 213, 219 4th Cir. 2005); Carpenters Health & Welfare Trust Fund v. S&S Fashion Floors, Inc., 516 F. Supp. 2d 931, 935-36 (C.D. Ill. 2007). Specifically, if an employer does not use the withheld funds to pay the premiums, courts have concluded that the employer necessarily had discretionary authority because it was able to choose to commingle the funds and put them to its own use. Russo v. B&B Catering, Inc., 209 F. Supp. 2d 857, 862 (N.D. Ill. 2002); see also United States v. Whiting, 471 F.3d 792, 798-800 (7th Cir. 2006) (finding that criminal defendant converted payroll deductions intended for payment into ERISA plan by leaving the funds in the company's general operating account). Thus, in regard to defendants' alleged failure to apply the monies withheld from plaintiffs' paychecks for payment of the plan premiums, defendants were fiduciaries. Accordingly, plaintiffs may bring a civil action against defendants for benefits under the plan or to otherwise enforce rights under the plan and Count I is not futile.

2. Count II

Count II of the proposed amended complaint alleges that defendants violated 29 U.S.C. § 1105. This provision of ERISA provides that "a fiduciary with respect to a plan shall be liable for a breach of fiduciary responsibility of another fiduciary" in certain circumstances when one fiduciary has knowledge of another fiduciary's wrongful actions.

Id. Defendants argue that plaintiffs only vaguely allege that defendants were fiduciaries and do not allege that any defendant had knowledge of another defendant's wrongful actions. As discussed above, plaintiffs have alleged sufficient facts to raise a question as to whether defendants were fiduciaries.*fn1 However, plaintiffs have not alleged that any defendant had knowledge of another defendant's ...


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