United States District Court, N.D. New York
NEW YORK STATE TEAMSTERS CONFERENCE PENSION AND RETIREMENT FUND by its Trustees, Michael S. Scalzo, Sr., John Bulgaro, Daniel W. Schmidt, Tom J. Ventura, Bob Schaeffer, Brian Hammond, Mark May and Paul Markwitz, Plaintiff,
C&S WHOLESALE GROCERS, INC., Defendant.
LAW GROUP EDWARD J. MEEHAN, ESQ. MARK C. NIELSEN, ESQ.
STEPHEN M. SAXON, ESQ. Attorneys for Plaintiff
PARAVATI, KARL, GREEN, & DEBELLA, LLP VINCENT M. DEBELLA,
ESQ. Attorneys for Plaintiff
C&S WHOLESALE GROCERS, INC.ALAN KINTISCH, ESQ. Attorneys
HANCOCK ESTABROOK, LLPASHLEY D. HAYES, ESQ. JOHN G. POWERS,
ESQ. Attorneys for Defendant
DAY EVAN MILLER, ESQ. JACOB M. ROTH, ESQ. SARA PIKOFSKY, ESQ.
Attorneys for Defendant
MEMORANDUM-DECISION AND ORDER
SCULLIN, Senior Judge
before the Court is Defendant's motion to dismiss for
failure to state a claim pursuant to Rule 12(b)(6) of the
Federal Rules of Civil Procedure. See Dkt. No. 23.
Defendant filed this motion prior to Plaintiff amending its
complaint as of right. After Plaintiff filed its amended
complaint, the Court provided Defendant with the option to
file a new motion to dismiss or to supplement its original
motion. Defendant chose to supplement its original motion.
Therefore, Defendant's motion, as supplemented, is
directed at Plaintiff's amended complaint.
Traffic Company ("Penn Traffic") was a
Syracuse-based food retail and wholesale company that
operated under the "P&C Foods, " "Bi-Lo
Foods, " and "Quality Markets" trade names.
See Dkt. No. 28, First Amended Complaint, at ¶
16. Penn Traffic owned two warehouses located in Syracuse,
New York, and DuBois, Pennsylvania. See Id. at
¶ 17. At the Syracuse warehouse, Penn Traffic employed
approximately 450 members of Teamsters Local 317. See
Id. at ¶ 19. Penn Traffic was a party to
"various collective bargaining agreements with Teamsters
Local 317." See Id. at ¶ 20. Relevant to
this litigation, Penn Traffic was required to contribute to a
pension fund on behalf of employees who worked at the
Syracuse warehouse and whom Teamsters Local 317 represented.
See Id. at ¶ 20.
Pension Fund is managed by a Board of Trustees and regulated
pursuant to the Employee Retirement Income Security Act of
1974 ("ERISA") and the Labor Management Relations
Act ("LMRA"). See Id. at ¶ 9.
Plaintiff Pension Fund is organized as a "multiemployer
plan, " which means that Penn Traffic is one of several
employers who contribute to Plaintiff Pension Fund. See
Id. Penn Traffic's participation in Plaintiff
Pension Fund exposed it to substantial withdrawal liability
if it ceased making contributions. See Id. at ¶
2010, after filing for bankruptcy, Penn Traffic fired all 450
employees whom Teamsters Local 317 represented and
permanently closed its Syracuse warehouse. See Id.
at ¶ 73. Since the Teamsters Local 317 members were no
longer employed, Penn Traffic was no longer making any
contributions to Plaintiff Pension Fund. See Id.
Thus, Penn Traffic triggered withdrawal liability pursuant to
ERISA. See id.
April 2010, Plaintiff Pension Fund delivered a notice and
demand for payment of the withdrawal liability in the amount
of $63, 592, 689.25 to Penn Traffic. See Id. at
¶ 75. Penn Traffic did not contest the amount of
withdrawal liability. See Id. at ¶ 80. As a
result of Penn Traffic's bankruptcy proceedings, however,
Plaintiff Pension Fund only received $5, 206, 088.34, leaving
a balance of $58, 386, 600.91 in unpaid withdrawal liability.
See Id. at ¶ 80. Plaintiff Pension Fund
commenced this action in an attempt to recover the unpaid
funds, not from Penn Traffic, which is not a party to this
lawsuit, but from Defendant.
is a national wholesale supply company. See Id. at
¶ 13. Around March 2008, Defendant began negotiations to
acquire Penn Traffic's wholesale distribution division.
See Id. at ¶ 29. One complication in
Defendant's plan was that an outright purchase of Penn
Traffic's Syracuse warehouse would trigger Penn
Traffic's withdrawal liability, a result Defendant wanted
to avoid. See Id. at ¶¶ 42-43. Therefore,
Defendant attempted to structure the takeover to foreclose
exposure to Penn Traffic's withdrawal liability - a
strategy that Plaintiff Pension Fund deems an actionable
scheme and Defendant labels "prudent business
judgment." See id.
December 2008, Defendant entered into an asset purchase
agreement and other agreements to assume control of specified
assets and liabilities within Penn Traffic's wholesale
distribution division. See Dkt. No. 28 at ¶ 51.
"[Defendant] acquired, inter alia, Penn
Traffic's wholesale distribution contracts, customers,
equipment, files, records, goodwill, intellectual property,
accounts receivable, and employees dedicated to Penn
Traffic's wholesale distribution division who were
not members of Teamsters Local 317." See
Id. at ¶ 52; see also Dkt. No. 23-3,
Miller Declaration Exhibit "A" at § 1.2(a)-(h)
(listing acquired assets), § 4.21(c) (providing that
Defendant would hire only those Penn Traffic employees not
subject to collective bargaining agreements). However,
Defendant did not acquire, among other things, Penn
Traffic's retail business, facilities, leases and
subleases, cash, and employee benefit plans. See Id.
at § 1.3(a)-(e). Furthermore, Defendant specifically
disclaimed any authority or power over any of Penn
Traffic's employees who were associated with Teamsters
Local 317. See Dkt. No. 23-4, Miller Declaration
Exhibit "B" at § 10.
agreements created an "independent contractor"
relationship between Penn Traffic and Defendant. See
Id. Defendant shipped merchandise to Penn Traffic's
warehouses, including the Syracuse warehouse; and Penn
Traffic stored, handled, and ultimately distributed the
merchandise to Defendant's customers. See Id. at
§ 1.2. Under the contract, Penn Traffic retained
responsibility for "all employees, Facility and storage
leases, material handling and transportation equipment,
contracts and all other liabilities associated with the
Facilities and any other storage." See id.
to Plaintiff, operations at the Syracuse warehouse "were
materially identical to what they would have been had
[Defendant] formally acquired the entirety of Penn
Traffic's wholesale distribution." See Dkt.
No. 28 at ¶ 64. The only difference was that Penn
Traffic continued to operate independently and remained the
employer of record for all 450 Teamsters Local 317 employees.
Plaintiff alleges, and Defendant does not dispute, that
Defendant's plan was to acquire Penn Traffic's
wholesale business without becoming responsible for Penn
Traffic's withdrawal liability. See Dkt. No. 42
at 4. Plaintiff claims that Defendant "modified the deal
structure for no reason other than shirking pension
obligations to the Syracuse employees and the Pension
Fund." See id.; see also Dkt. No. 28
at ¶¶ 24-28.
Standard of review
use a two-step process when addressing a Rule 12(b)(6)
motion. "First, they isolate the moving party's
legal conclusions from its factual allegations."
Hyman v. Cornell Univ., 834 F.Supp.2d 77, 81
(N.D.N.Y. 2011). Second, they accept factual allegations as
true and "determine whether [those allegations]
plausibly give rise to an entitlement to relief."
Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). A
pleading must contain more than a "blanket assertion
of entitlement to relief." Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555 n.3 (2007). Thus, to
withstand a motion to dismiss, a pleading must be
"'plausible on its face'" such that it
contains "factual content that allows the court to draw
the reasonable inference that the defendant is liable for the
misconduct alleged." Iqbal, 556 U.S. at 678
(quotation and other citation omitted).
Plaintiff's first amended complaint
asserts four claims against Defendant. In its first cause of
action, Plaintiff alleges that Defendant is responsible for
Penn Traffic's withdrawal liability as the successor to
Penn Traffic. See Dkt. No. 28 at ¶¶ 84-88.
Specifically, Plaintiff claims that Defendant was aware of
Penn Traffic's withdrawal liability and understood the
approximate amount of liability to expect. See Id.
at ¶¶ 84-86. Furthermore, Plaintiff asserts that
Defendant maintained the same address, telephone number and
facility as Penn Traffic, serviced the same customers as Penn
Traffic, and used the same personnel as Penn Traffic. See
Id. at ¶ 87. Therefore, according to Plaintiff,
under federal common law, Defendant is jointly and severally
liable for the outstanding withdrawal liability. See
Id. at ¶ 88.
second cause of action, Plaintiff alleges that "a
principal purpose of the Transaction undertaken by
[Defendant] and Penn Traffic was to evade or avoid withdrawal
liability, in violation of ERISA." See Id. at
¶ 91. Thus, according to Plaintiff, under ERISA,
Defendant is liable for the balance of the withdrawal
liability together with interest, costs, attorney's fees
and penalties. See Id. at ¶ 92.
third cause of action, Plaintiff contends that Defendant was
an employer under ERISA in "common control" with
Penn Traffic and is thus jointly and severally liable for
withdrawal liability. See Id. at ¶ 96. To
support this claim, Plaintiff asserts that Defendant and Penn
Traffic jointly executed a plan to split up Penn
Traffic's wholesale distribution business to avoid
liability. See Id. at ¶ 94. Furthermore,
Plaintiff argues that Defendant and Penn Traffic kept
financial information about the Syracuse facility separate
from their other business lines and stood to realize a profit
based on the business. See Id. at ¶ 95.
in its fourth cause of action, Plaintiff alleges that
Defendant shares liability as a joint employer. See
Id. at ¶¶ 97-101. Plaintiff claims that
Defendant made payments to Penn Traffic that were related to
obligations under the collective bargaining agreement.
See Id. at ¶ 99. Alternatively, Plaintiff
argues that Defendant had a "duty" to Plaintiff
under applicable law. See Id. at ¶ 100.
Plaintiff's first cause of action - ...