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Keyes Fibre Corp. v. Pace Industry-Management Pension Fund

United States District Court, M.D. Tennessee, Nashville Division

October 17, 2017




         Pending before the court is Defendant's Motion to Dismiss Complaint (Docket No. 20). Plaintiff has filed a Response (Docket No. 24), Defendant has filed a Reply (Docket No. 25), and Plaintiff has filed a Sur-Reply (Docket No. 28). For the reasons stated herein, Defendant's Motion will be granted.


         This action was brought by Keyes Fibre Corporation to resolve whether Defendant, the Pace Industry Union-Management Pension Fund (“the Fund”), in critical and declining status, can require a withdrawing employer (Plaintiff) to pay a pro rata portion of the Fund's accumulated funding deficiency[1] through a unilateral modification to the Fund's Rehabilitation Plan. Plaintiff alleges that the Fund entered critical status, which means it is in dire financial condition, in 2010 and, as required by the Employee Retirement Income Security Act (“ERISA”), adopted a Rehabilitation Plan to forestall insolvency.[2] A rehabilitation plan consists of actions, such as reductions in plan expenditures, reductions in future benefit accruals, and increases in contribution rates, designed to improve the fund's financial outlook. WestRock RKT Co. v. Pace Industry Union-Management Pension Fund, 856 F.3d 1320, 1322 (11th Cir. 2017).

         Plaintiff asserts that, in 2012, Plaintiff and its employees' union negotiated a renewed collective bargaining agreement (“CBA”), in which Plaintiff agreed to continue participation in the Fund and also agreed to the Fund's 2010 Rehabilitation Plan.[3] See Docket No. 1-2 (Article 23 of the CBA). Plaintiff claims that, in 2013, [4] the Fund's trustees amended the 2010 Rehabilitation Plan to include the following language: “In addition, in the event an Employer withdraws during a Plan Year when the Fund has an accumulated funding deficiency, as determined under Section 304 of ERISA, the Employer shall be responsible for its pro rata share of such deficiency in addition to any withdrawal liability determined under Section 4211 of ERISA.” Plaintiff contends that it never agreed to be bound to any amendment to the 2010 Rehabilitation Plan.

         Plaintiff withdrew from the Fund in 2016 when its CBA expired. Plaintiff alleges that the Fund has demanded payment from Plaintiff of a portion of the Fund's accumulated funding deficiency in accordance with its 2013 amendment to the Rehabilitation Plan. Plaintiff claims that requiring it to pay this pro rata portion of the accumulated funding deficiency violates ERISA. Plaintiff also asserts that, because this action requires the court to interpret and apply the language of a CBA, federal question jurisdiction exists under the Labor Management Relations Act (“LMRA”), 29 U.S.C. § 185. In its Response to Defendant's Motion, Plaintiff claims that “[a]t base, this case is about whether the Fund can unilaterally alter - through the 2013 Amendment - a contractual commitment to comply with the 2010 Rehabilitation Plan.” Plaintiff then asserts that the court can and should assess whether the Fund can impose the 2013 Amendment under the LMRA and whether the Fund can unilaterally impose the 2013 Amendment against Plaintiff under ERISA.

         Defendant asks the court to dismiss this action, arguing that ERISA does not authorize an employer to bring suit to challenge an aspect of a fund's duly-adopted rehabilitation plan. Following Plaintiff's Response brief, in which Plaintiff asserts that its claims also involve the LMRA, Defendant argues that Plaintiff has not sufficiently pled a claim under the LMRA, that any adjudication of the CBA in this case under the LMRA would not resolve the dispute, and that Plaintiff cannot bring a declaratory judgment action under the LMRA to challenge the validity of the amended Rehabilitation Plan.


         For purposes of a motion to dismiss, the court must take all of the factual allegations in the complaint as true. Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009). To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face. Id. 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. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice. Id. When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief. Id. at 1950. A legal conclusion couched as a factual allegation need not be accepted as true on a motion to dismiss, nor are recitations of the elements of a cause of action sufficient. Fritz v. Charter Township of Comstock, 592 F.3d 718, 722 (6th Cir. 2010).


         The Complaint states that Plaintiff brings this claim for declaratory relief pursuant to 28 U.S.C. §§ 2201 and 2202. The Declaratory Judgment Act authorizes federal courts to declare the rights and other legal relations of any interested party seeking such declaration, without granting further relief. 28 U.S.C. § 2201; Emergency Medical Care Facilities v. BlueCross BlueShield of Tenn., Inc., 2017 WL 237650 at * 9 (W.D. Tenn. Jan. 19, 2017). But Section 2201 does not create an independent cause of action. Davis v. United States, 499 F.3d 590, 594 (6th Cir. 2007). The point of the Declaratory Judgment Act is to create a remedy for a preexisting right enforceable in federal court. It does not provide an independent basis for federal subject matter jurisdiction. Emergency Medical Care at * 9. Thus, Plaintiff must allege another basis for subject matter jurisdiction in federal court. Defendant contends that Plaintiff has not alleged a cognizable federal cause of action.


         Plaintiff, for the first time, argues in response to Defendant's Motion, that granting the Fund's Motion would “provoke” constitutional concerns. There is no claim in the Complaint that Defendant's actions or ...

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