Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_09-cv-00465/USCOURTS-cand-4_09-cv-00465-4/pdf.json

Nature of Suit Code: 791
Nature of Suit: Employee Retirement Income Security Act (ERISA)
Cause of Action: 29:1132 E.R.I.S.A.: Employee Benefits

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

UNITED STATES DISTRICT COURT

 NORTHERN DISTRICT OF CALIFORNIA

BOARD OF TRUSTEES OF THE

AUTOMOBILE INDUSTRIES

Plaintiff,

v. 

GROTH OLDSMOBILE/CHEVROLET

Defendant.

________________________________/

No. C-09-0465 PJH

ORDER GRANTING MOTION TO

DISMISS AND MOTION TO STRIKE

The motion of plaintiffs and counterdefendants Board of Trustees of the

Automotive Industries Welfare Fund and the Automotive Industries Pension Fund, and

Jim Beno (“Trustees”) to dismiss the counterclaim pursuant to Federal Rule of Civil

Procedure 12(b)(6), and motion to strike portions of the prayer for relief and portions of

the amended answer pursuant to Rule 12(f), came on for hearing before this court on

July 14, 2010. The Trustees appeared by their counsel Michelle Sicula, Kimberly

Hancock, and Caren Sencer; and defendant and counterclaimant Groth

Oldsmobile/Chevrolet (“Groth”) appeared by its counsel Joshua Cliff. 

Having read the parties’ papers and carefully considered their arguments and the

relevant legal authority, and good cause appearing, the court hereby GRANTS the

motion. 

BACKGROUND

This is a case brought under the Employment Retirement Income Security Act

(“ERISA”), 29 U.S.C §§ 1002, et seq., and § 301(a) of the National Labor Relations Act

of 1947, 29 U.S.C. § 185(a), seeking to recover unpaid contributions to employee

Case 4:09-cv-00465-PJH Document 60 Filed 07/16/10 Page 1 of 7
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

1

 The Trustees allege that “[a]t all relevant times, Mr. Andrews reported to Don

Crosatto, who was also a Trustee,” and that both reported to Jim Beno.

2

welfare and pension funds, owed under a collective bargaining agreement (“CBA”). 

Groth is an auto dealer that employs members of the Machinist Union (“Union”). 

On behalf of these employees, Groth contributes to union welfare and pension trust

funds jointly administered by Groth and the Union (“Employer Trustees” and “Union

Trustees” respectively). Periodically, the parties negotiate the CBAs, setting the terms

of these contributions. 

In the underlying complaint, the Trustees sought delinquent payments allegedly

owed under the most recent CBA which covers the period from July 2008 to August 

2012 (“2008 CBA”). Groth filed an answer, and a counterclaim alleging that during the

negotiation of the previous CBA, which ran from July 2006 to June 2008 (“the 2006

CBA”), the Trustees fraudulently and negligently misrepresented the rules of the trust

and other material facts, and that they breached an applicable conflict policy.

Groth alleges that during the negotiations regarding the 2006 CBA, it proposed to

reduce its pension contributions from $586.66 to $50.00 per employee per month and to

direct the rest of the money into a 401(k) plan. Craig Andrews (“Andrews”) who serves

as both a Pension Fund Trustee and as the Union’s chief negotiator, allegedly claimed

that this proposed alteration would violate an existing Trust rule that prohibited

reductions in pension contributions.1

 

According to Groth, Andrews knew that such a rule had been proposed but that

its approval was contingent upon the results of arbitration between the Union Trustees

and the Employer Trustees. Thus, Groth argues that Andrews knowingly

misrepresented the existing terms of the Trust both orally and in a written statement that

read, “Pension freeze at current amount. If trust changes rule, pension may be

decreased. Company and union will meet and discuss if Trust changes rule.” 

Groth claims to have relied on these representations when it concluded the

Case 4:09-cv-00465-PJH Document 60 Filed 07/16/10 Page 2 of 7
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

3

negotiations without adjusting its future pension obligations. Nevertheless, the parties

consented to a “reduction agreement” that would allegedly trigger Groth’s proposed

modifications if the Employer Trustees won the pending arbitration regarding

permissible pension contributions. The “reduction agreement,” memorialized in Article

XII of the 2006 CBA, provides that the “Freeze is depending on arbitration ruling. If

ruled in favor of management, the company and union will meet to discuss

changes/reductions.” 

On March 20, 2007, the Employer Trustees succeeded at arbitration, thus

blocking the Union Trustees’ proposed prohibition on pension reductions. Groth claims

that Andrews failed to inform them of the result and that Union member Steve Older

affirmatively misrepresented the arbitration outcome. Consequently, Groth not only

continued contributing $586.66/month/employee to the Trust for the remainder of the

2006 CBA, but also agreed to a provision in the 2008 CBA that preserved the

arrangement. 

In 2008, presumably after it ratified the 2008 CBA, Groth learned of the alleged

misrepresentations and requested relief from the Trust Fund. According to Groth, the

Trust Fund directed the appeal to a Trustees’ committee which summarily dismissed the

appeal without considering it in good faith. Nevertheless, Groth then reduced its

contributions to $50/month/employee “in accordance with Groth’s understanding that

this reduction would be permitted, in the event such reductions were permitted by the

Trust Fund.” On February 9, 2009, the Trustees filed the present action, seeking to

collect delinquent pension fund contributions owed under the 2008 CBA. 

The counterclaim alleges (1) fraud, (2) negligent misrepresentation, and (3)

conflict of interest/breach of conflict policy. Based on these allegations, Groth seeks to

have its pension obligations reduced to $50 retroactive from January 27, 2007. In the

alternative, it seeks the opportunity to renegotiate the terms of the pension contributions

under the Trust rules that were applicable during the 2006 CBA negotiations. 

Additionally, Groth seeks general damages, punitive damages, and attorneys fees. 

Case 4:09-cv-00465-PJH Document 60 Filed 07/16/10 Page 3 of 7
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

4

The Trustees now move to dismiss the counterclaim, and also move to strike the

prayers for punitive damages and to reopen negotiation of the CBA, as well as the

affirmative defenses pertaining to fraud, misrepresentation, and conflict of interest. 

Groth opposes the motion to dismiss the first and second causes of action in the

counterclaim, but does not respond to the motion to dismiss the third cause of action, or

to the motion to strike. 

DISCUSSION

A. Legal Standard

A motion to dismiss under Rule 12(b)(6) tests for the legal sufficiency of the

claims alleged in the complaint. Ileto v. Glock, Inc., 349 F.3d 1191, 1199-1200 (9th Cir.

2003). Review is limited to the contents fo the complaint. Allarcom Pay Television, Ltd.

V. Gen. Instrument Corp., 69 F.3d 381, 385 (9th Cir. 1995). To survive a motion to

dismiss for failure to state a claim, a complaint generally must satisfy only the minimal

notice pleading requirements of Federal Rule of Civil Procedure 8. 

Rule 8(a)(2) requires only that the complaint include a “short and plain statement

of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2).

Specific facts are unnecessary – the statement need only give the defendant “fair

notice of the claim and the ground upon which it rests.” Erickson v. Pardus, 551 U.S.

89, 93 (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)). All allegations

of material fact are taken as true. Id. at 94. However, “a plaintiff’s obligations to provide

the grounds of his entitlement to relief requires more than labels and conclusions, and a

formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S.

at 555 (citations and quotations omitted). Rather, the allegations in the complaint “must

be enough to raise a right to relief above the speculative level. Id.

A motion to dismiss should be granted if the complaint does not proffer enough

facts to state a claim for relief that is plausible on its face. See id. at 558-59. “[W]here

the well-pleaded facts do not permit the court to infer more than the mere possibility of

misconduct, the complaint has alleged – but it has not ‘show[n]’ – ‘that the pleader is

Case 4:09-cv-00465-PJH Document 60 Filed 07/16/10 Page 4 of 7
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

5

entitled to relief.’” Ashcroft v. Iqbal, __ U.S. __, 129 S.Ct. 1937, 1950 (2009). 

Finally, in actions alleging fraud, “the circumstances constituting fraud or mistake

shall be stated with particularity.” Fed. R. Civ. P. 9(b). Under Rule 9(b), the complaint

must allege specific facts regarding the fraudulent activity, such as the time, date, place,

and content of the alleged fraudulent representation, how or why the representation was

false or misleading, and in some cases, the identity of the person engaged in the fraud. 

In re GlenFed Sec. Litig., 42 F.3d 1541, 1547-49 (9th Cir. 1994). 

B. Motion to Dismiss 

The Trustees move to dismiss the first two counts of the counterclaim on three

separate bases. First, they contend that both § 302 of the Labor Management

Relations Act (“LMRA”), 29 U.S.C. § 186, and ERISA § 515, 29 U.S.C. § 1145, bar

claims of fraud by an employer against a pension trust fund where the alleged

misrepresentations are not specified in a written agreement. Second, they argue that

ERISA § 514, 29 U.S.C. § 1144, preempts Groth’s state law fraud and

misrepresentation claims. Third, they assert that the pleadings fail to satisfy the

heightened standard of Federal Rule of Civil Procedure 9(b). 

Because the court finds that the ERISA § 514 argument is dispositive, and that

the first and second causes of action in the counterclaim are preempted, the court

GRANTS the motion on that basis. Thus, the court does not address the argument that

the claims are precluded by LMRA § 302(a) or ERISA § 515, the argument that the

claims conflict with Congress’ “comprehensive scheme of civil remedies” in

contravention of ERISA § 502(a), 29 U.S.C. § 1132(a), or the assertion that the

pleadings do not conform to Rule 9(b). 

The Trustees assert that ERISA preempts Groth’s claims because they “relate to”

an employee benefit plan as articulated by ERISA § 514(a). ERISA § 514(a) expressly

preempts “state laws insofar as they . . . relate to any employee benefit plan.” 29

U.S.C. 1144(a); see also Abraham v. Norcal Waste Sys., Inc., 265 F.3d 811, 819 (9th

Cir. 2001). 

Case 4:09-cv-00465-PJH Document 60 Filed 07/16/10 Page 5 of 7
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

6

State law “relates to” an ERISA benefit plan if there is a “connection with” or

“reference to” such a plan. Abraham, 265 F.3d at 820. The “reference to” prong

requires that the state law act immediately and exclusively upon ERISA plans or that the

existence of ERISA plans is essential to the law's operation. Rutledge v. Seyfarth,

Shaw, Fairweather & Geraldson, 201 F.3d 1212, 1216 (9th Cir. 2000). That prong is

clearly inapplicable here. 

In applying the “connection with” prong, the court looks to whether the state law

encroaches on “relationships” regulated by ERISA. Abraham, 265 F.3d at 820-21; see

also Geweke Ford v. St. Joseph's Omni Preferred Care, Inc., 130 F.3d 1355, 1358 (9th

Cir. 1997). Under this “relationship” test, ERISA preempts a state law claim if the claim

encroaches on the relationships ERISA regulates, “such as between plan and plan

member, plan and employer, and plan and trustee.” Blue Cross of Cal. v. Anasthesia

Care Assocs. Med. Group, 187 F.3d 1045, 1053 (9th Cir. 1999); see also Rutledge, 201

F.3d at 1219.

An appropriate inquiry into ERISA preemption should examine “the objectives of

the ERISA statute as a guide to the scope of the state law that Congress understood

would survive as well as to the nature of the effect of the state law on ERISA plans.” 

Rutledge, 201 F.3d at 1216 (quoting California Div. of Labor Standards v. Dillingham,

519 U.S. 316, 325 (1997)). Under one articulation of this test by the Ninth Circuit, a

state law claim is preempted if it “encroaches on the relationships regulated by ERISA.” 

Geweke, 130 F.3d at 1358. 

The Trustees persuasively argue that Groth’s claims are invalid because they

implicate ERISA’s core concerns – the payment, collection, and security of pension

contributions – and affect a relationship between plan and employer with respect to

ensuring security of pension contributions. Specifically, they contend that Groth, a

signatory employer, seeks restitution (refund) from an employee benefit plan of

contributions paid on behalf of Groth employees who are plan participants and which

contributions were paid pursuant to the express terms of a written CBA. 

Case 4:09-cv-00465-PJH Document 60 Filed 07/16/10 Page 6 of 7
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

7

Groth’s attempt to divorce its claim from the underlying ERISA complaint is

unconvincing. Any of Groth’s requested remedies would substantially impact collections

under the agreement, the maintenance of current funds, and the payment of benefits to

employees. While Groth correctly notes that Congress did not intend to preempt state

regulation that is “quite remote from the areas with which ERISA is expressly

concerned,” Rutledge, 201 F.3d at 1217, its own claims do affect an area and a

relationship regulated by ERISA. Moreover, ERISA preempts any state claim for

restitution of contributions. See Chase v. Trustees of the Western Conference of

Teamsters Pension Trust Fund, 753 F.2d 744, 746 (9th Cir. 1985). 

Because Groth’s first and second causes of action for fraud and

misrepresentation against the Trust Funds substantially affect an ERISA-governed

relationship, they “relate to” to an “employment benefit plan” and are preempted under §

514(a). Accordingly, the Trustees’ motion to dismiss the first two causes of action is

GRANTED. 

CONCLUSION

In accordance with the foregoing, the motion to dismiss the first and second

causes of action asserted in the counterclaim is GRANTED. In addition, the motion to

dismiss the third cause of action in the counterclaim and the motion to strike are

GRANTED as unopposed. 

A further case management conference will be held on November 18, 2010, at

2:00 p.m.

IT IS SO ORDERED

Dated: July 16, 2010

 

PHYLLIS J. HAMILTON

United States District Judge

Case 4:09-cv-00465-PJH Document 60 Filed 07/16/10 Page 7 of 7