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Trustees of the Sheet Metal Workers Production Workers Welfare Fund v. Southbay Air Systems

September 19, 2006

TRUSTEES OF THE SHEET METAL WORKERS PRODUCTION WORKERS WELFARE FUND, ET AL., PLAINTIFFS,
v.
SOUTHBAY AIR SYSTEMS, LLC, ATLANTIC AIR SYSTEMS, INC.,D/B/A SOUTHBAY AIR SYSTEMS, AND SOUTHBAY AIR SYSTEMS, DEFENDANTS.
ATLANTIC AIR SYSTEMS, INC., D/B/A SOUTHBAY AIR SYSTEMS, DEFENDANT/THIRD PARTY PLAINTIFF,
v.
MICHAEL MCCARTHY AND LAWRENCE RAIMONDI, THIRD PARTY DEFENDANTS.



The opinion of the court was delivered by: Hurley, Senior District Judge

MEMORANDUM & ORDER

INTRODUCTION

Plaintiffs Trustees of the Sheet Metal Workers Production Workers Welfare Fund, et al. ("Trustees"), brought the present suit against Defendants Southbay Air Systems, LLC, Atlantic Air Systems d/b/a Southbay Air Systems, and Southbay Air Systems alleging that Defendants breached various fiduciary duties that are forth in the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1104. Defendant Atlantic Air Systems d/b/a Southbay Air Systems ("Atlantic Air") subsequently brought a third-party complaint against Third-Party Defendants Michael McCarthy ("McCarthy") and Lawrence Raimondi ("Raimondi") (collectively "Third-Party Defendants") also alleging ERISA violations. Third-Party Defendants now move to dismiss the Third Party Complaint ("TPC") under the theory that Atlantic Air lacks standing pursuant to Federal Rule of Civil Procedure ("Rule") 12(b)(1), that Atlantic Air has failed to state a claim pursuant to Rule 12(b)(6) or, alternatively, that the motion should be stricken pursuant to Rule 14(a). Finding that Atlantic Air has failed to establish that it has standing to bring the present suit under ERISA, the Court GRANTS Third-Party Defendants' motion to dismiss.

BACKGROUND

The following summary of facts is drawn from the TPC, and the First-Party Complaint, to the extent it is incorporated by reference. First-Party Plaintiffs are the trustees of jointly administered, multi-employer, labor management trust funds. The funds are established and maintained by the union and various employers pursuant to the terms of the collective bargaining agreement. First-Party Defendant/Third-Party Plaintiff Atlantic Air is a corporation with its principal place of business in Hauppauge, New York. Third-Party Defendants McCarthy and Raimondi are shareholders and former controlling officers of Atlantic Air.

First-Party Plaintiffs brought suit to recover for monies owed the union and various benefit funds from First-Party Defendants. Atlantic Air, one of the First-Party Defendants, then brought suit against McCarthy and Raimondi. They were "controlling corporate officials and charged with paying benefits to the [First-Party] plaintiffs from August, 2003 until approximately April 1, 2004." (TPC ¶ 10.) During that time, Atlantic Air alleges that McCarthy and Raimondi "looted assets from Atlantic Air" (Id.) and that, upon discovery, they were fired by David Wood ("Wood"), the only other shareholder and corporate officer.

As a result of the "looting," Wood was forced to "make arrangement[s] for short term financing to pay off the massive debt owed to the plaintiff [Trustees]." (Id. ¶ 11.) The TPC alleges that this debt of "almost $200,000" (id. ¶ 12) was paid off by Wood during April and May of 2004 from loans that he procured from family members (id. ¶ 11).

After the Trustees filed their complaint on April 11, 2005, Atlantic Air filed the TPC on June 23, 2005. Third-Party Defendants subsequently moved to dismiss the TPC, and Atlantic Air opposed the motion.

STANDARD

Questions of standing and ERISA coverage implicate the court's subject matter jurisdiction. Toussaint v. JJ Weiser & Co., No. 04 Civ. 2592 (MBM), 2005 WL 356834, at *4 (S.D.N.Y. Feb. 13, 2005) (citing Moore v. PaineWebber, Inc., 189 F.3d 165, 169 n.3 (2d Cir.1999)). When considering a motion to dismiss pursuant to Rule 12(b)(1), the court must take all facts alleged in the complaint as true and draw all reasonable inferences in favor of the plaintiff. Raila v. United States, 355 F.3d 118, 119 (2d Cir. 2004); see also Juvenile Matters Trial Lawyers Ass'n v. Judicial Dep't, 363 F. Supp. 2d 239, 243 (D. Conn. 2005). "The court may not dismiss a complaint unless it appears beyond doubt, even when the complaint is liberally construed, that the plaintiff can prove no set of facts which would entitle him to relief." Jaghory v. New York State Dep't of Educ., 131 F.3d 326, 329 (2d Cir. 1997) (quotation marks omitted). However, "[i]t is the affirmative burden of the party invoking [federal subject matter] jurisdiction . . . to proffer the necessary factual predicate-not just an allegation in a complaint-to support jurisdiction." London v. Polishook, 189 F.3d 196, 199 (2d Cir. 1999) (citations omitted); see also Robinson v. Overseas Military Sales Corp., 21 F.3d 502, 507 (2d Cir. 1994) ("In determining whether a plaintiff has met this burden, we will not draw argumentative inferences in the plaintiff's favor"). Also, "[i]n resolving a motion to dismiss for lack of subject matter jurisdiction under Rule 12(b)(1), a district court . . . may refer to evidence outside the pleadings." Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000) (citing Kamen v. American Tel. & Tel. Co., 791 F.2d 1006, 1011 (2d Cir. 1986)); compare Courtenay Comm. Corp. v. Hall, 334 F.3d 210, 213 (2d Cir. 2003) ("When presented with a 12(b)(6) motion, the district court may not consider matters outside of the pleadings without converting the motion into a motion for summary judgment").

DISCUSSION

Third Party Defendants McCarthy and Raimondi argue that Atlantic Air is an employer, and, as such, it lacks ERISA standing. (TPD's Mem. at 4-6.) Atlantic Air counters that the definition of the term "fiduciary" should be construed "functionally," such that it should be considered a plan fiduciary within the meaning of ERISA. (Atlantic Air's Opp'n Mem. at 5.)

"ERISA is a 'comprehensive and reticulated statute,' which Congress adopted after careful study of private retirement pension plans." Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 510 (1981) (quoting Nachman Corp. v. Pension Benefit Guar. Corp., 446 U.S. 359, 361 (1980)). When considering issues of standing, the Second Circuit has held that the statutory intent was to "afford standing to those within the zone of interests ERISA was intended to protect." Mullins v. Pfizer, Inc., 23 F.3d 663, 668 (2d Cir. 1994) (citation omitted).

Atlantic Air's claim is brought pursuant to under 29 U.S.C. § 1132(a)(3). Section 1132(a)(3) allows "a participant, beneficiary, or fiduciary"*fn1 to bring a civil action challenging other violations of ERISA. The Supreme Court has construed these provisions narrowly to allow only the stated categories of parties to sue for relief directly under ERISA. See Franchise Tax Bd. v. Construction Laborers Vacation Trust for S. Cal., 463 U.S. 1, 27 (1983) ("ERISA carefully enumerates the parties entitled to seek relief under [§ 502(a)(3)]; it does not provide anyone other than participants, beneficiaries, or fiduciaries with an express cause of action . . . ."). The Second Circuit has followed on these well-marked paths, stating that § 1132(a)(3) "names only three classes of persons who may commence an action," those being: (1) a participant or beneficiary, (2) the Secretary of Labor, and (3) a fiduciary. Chemung Canal Trust Co. v. Sovran Bank/Maryland, 939 F.2d 12, 14 (2d Cir. 1991); see also Harris Trust & Sav. Bank v. Salomon Smith Barney, Inc., 530 U.S. 238, 247 (2000) (finding that ERISA Section 502(a)(3) strictly limits the "universe of plaintiffs who may bring certain civil actions."); Franchise Tax Bd.,463 U.S. at 27 ("ERISA carefully enumerates the parties entitled to seek relief under [§ 502(a)(3)]; it does not provide anyone other than participants, beneficiaries, or fiduciaries with an express cause of action . . . ."); Nechis v. Oxford Health Plans, Inc., 421 F.3d 96, 100 (2d Cir. 2005) (holding that only members of the enumerated classes have standing to bring a civil action under ERISA Section 502(a)(3)); Tuvia Convalescent Ctr. v. National ...


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