Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_06-cv-03078/USCOURTS-cand-4_06-cv-03078-19/pdf.json

Nature of Suit Code: 791
Nature of Suit: Employee Retirement Income Security Act (ERISA)
Cause of Action: 29:1001 E.R.I.S.A.: Employee Retirement

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United States District Court

For the Northern District of California

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

CALIFORNIA SERVICE EMPLOYEES HEALTH &

WELFARE TRUST FUND, MIKE GARCIA,

Trustee, CHARLES GILCHRIST, Trustee,

RAYMOND C. NANN, Trustee, LARRY T.

SMITH, Trustee,

Plaintiffs,

v.

ADVANCE BUILDING MAINTENANCE and

FORREST NOLIN,

Defendants.

 /

No. C 06-3078 CW

ORDER DENYING

DEFENDANT NOLIN'S

MOTION TO DISMISS OR

TRANSFER

Defendant Forrest Nolin has filed a motion to dismiss or

transfer. Plaintiffs California Service Employees Health & Welfare

Trust Fund (Trust) and trustees Mike Garcia, Charles Gilchrist,

Raymond Nann and Larry Smith oppose the motion. The motion was

submitted on the papers. Having considered all of the parties'

papers, the Court denies Defendant's motion.

BACKGROUND

As discussed in the Court's order on Plaintiffs' motion for

summary judgment, the Trust is a non-profit neutral third-party

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established to administer health and welfare benefits to members of

various unions pursuant to collective bargaining agreements with

employers including Advance. Nolin is the CEO and sole shareholder

of Advance. This dispute arises out of successive collective

bargaining agreements (CBAs), also called Maintenance Contractors

Agreements (MCAs), between Advance and members of Local 1877

(previously Local 399) of the Service Employees International Union

(SEIU). Stillwell Decl., Ex. A. Under the agreements, Advance was

required to make contributions to the Trust for health and welfare

benefits for covered employees.

On May 8, 2006, Plaintiffs filed this complaint against

Advance, alleging various unpaid benefits, late benefits and

related claims for interest and liquidated damages. On November 1,

2007, the Court granted in part Plaintiffs' motion for summary

judgment, finding that the only remaining question on the merits of

Plaintiffs' claims is whether Defendant Advance is entitled to

credit for a $1,825.48 overpayment. The Court also granted

Plaintiffs' request for injunctive relief and entered a preliminary

injunction preventing Advance from paying any dividends, bonuses or

extraordinary salary to its officers or directors until after

$647,382.02 owed to Plaintiffs is paid in full. Finally, the Court

granted Plaintiffs leave to file an amended complaint alleging four

additional causes of action, adding Nolin as a Defendant and adding

the Trust derivatively on behalf of Advance as a Plaintiff. 

Defendant Nolin now moves to dismiss Plaintiffs' six causes of

action against him and to dismiss or transfer the entire action to

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1

As Nolin notes, the Court's November 1, 2007 order granting

in part Plaintiffs' motion for summary judgment has already

addressed several of the grounds on which he moves. To the extent

the Court has already ruled on the issues raised in the motion, the

motion is denied. The remaining issues are discussed in this

order. 

3

the Central District of California based on improper venue.1

DISCUSSION

I. Motion to Dismiss Sixth Cause of Action

Under the Federal Rules of Civil Procedure, a complaint must

contain a "short and plain statement of the claim showing that the

pleader is entitled to relief." Fed. R. Civ. P. 8(a). A plaintiff

need not set out in detail the facts upon which it bases its claim;

however, the plaintiff must "give the defendant fair notice of what

the plaintiff's claim is and the grounds on which it rests." 

Conley v. Gibson, 355 U.S. 41, 47 (1957); see Bell Atlantic Corp.

v. Twombly, 127 S. Ct. 1955, 1964 (2007). All material allegations

in the complaint, "even if doubtful in fact," are assumed to be

true, id., and are construed in the light most favorable to the

plaintiff. NL Indus., Inc. v. Kaplan, 792 F. 2d 896, 898 (9th Cir.

1986). 

Nolin argues that Plaintiffs' sixth cause of action, seeking

equitable relief pursuant to ERISA §§ 502(a)(3) and 502(g)(2)(E), 

must be dismissed. Under those sections, Plaintiffs seek an

injunction requiring Nolin "to return to Defendant Advance all

improper bonuses[,] dividends, extraordinary compensation and other

preferences occurring up to the present" and requiring both

Defendants "to refrain from such improper acts in the future." FAC

¶ 64. Plaintiffs argue that they are entitled to bring such a

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claim under ERISA § 502(g)(2), which provides for money damages and

"such other legal or equitable relief as the court deems

appropriate" if defendants fail to pay required benefit

contributions. 29 U.S.C. § 1132(g)(2).

The claim for unpaid contributions is based on Plaintiffs'

first cause of action for payment of delinquent contributions under

ERISA § 515, which provides, 

Every employer who is obligated to make contributions

to a multiemployer plan under the terms of the plan or

under the terms of a collectively bargained agreement

shall, to the extent not inconsistent with law, make

such contributions in accordance with the terms and

conditions of such plan or such agreement.

29 U.S.C. § 1145. Nolin argues that, because he is not an

"employer" as defined by ERISA, Plaintiffs cannot seek relief

against him under § 502 based on a violation of § 515.

Plaintiffs argue that ERISA §§ 502(a)(3) and 502(g)(2) limit

only the people who may seek relief, not the people against whom

relief may be sought. Further, as Plaintiffs note, the Supreme

Court has held that an action under ERISA § 502(a)(3) can be

brought to impose a constructive trust over property received by a

third party. See Harris Trust v. Salomon Smith Barney, 530 U.S.

238, 246 (2000); Mertens v. Hewitt Associates, 508 U.S. 248, 260

(1993). As an initial matter, § 502(a) is a more general provision

that defines "Persons empowered to bring a civil action," while 

§ 502(g)(2) is a more specific provision allowing for additional

remedies for "actions involving delinquent contributions." 

However, both sections allow for equitable relief. Section 502(a)

provides for "appropriate equitable relief" to enforce or to

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redress violations of ERISA or plan terms. 29 U.S.C. §

1132(a)(3)(b). As discussed above, § 502(G)(2) allows for "such

other legal equitable relief as the court deems appropriate" for

delinquent contributions. Id. at § 1132(g)(2)(e). 

In Harris Trust, a fiduciary of an ERISA plan purchased

worthless investments from a third-party "in interest" in violation

of ERISA § 406(a), which prohibits the "sale or exchange . . . of

any property between the plan and a party in interest" and the

"transfer to . . . a party in interest . . . of any assets of the

plan." 29 U.S.C. § 1106(a)(1)(A) and (D). The plan in that case

sought rescission of the purchase, restitution from the party in

interest of the purchase price plus interest and disgorgement of

the party in interest's profits made from the plan assets

transferred to it, all pursuant to § 502(a)(3). Harris Trust, 530

U.S. at 243. 

The third party sought summary judgment, arguing that the

underlying ERISA violation was based on § 406(a), which prohibits a

fiduciary from causing the exchange of property between the plan

and a party in interest or the transfer of plan assets to a party

in interest. Id. Because the third party was not the fiduciary,

it argued that the plan could not sue it under ERISA. However, the

Supreme Court held that "§ 502(a)(3) itself imposes certain duties,

and therefore that liability under the provision does not depend on

whether ERISA's substantive provisions impose a specific duty on

the party being sued." Id. at 245. The Court then incorporated

remedial principles from the common law of trusts and held that "an

action for restitution against a transferee of tainted plan assets

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satisfies the 'appropriateness' criterion in § 502(a)(3)" and that

such relief is "'equitable' in nature." 530 U.S. at 253. Although

the underlying ERISA violation in that case was different than the

violation found here, the reasoning is analogous. 

Nolin's motion to dismiss Plaintiffs' sixth cause of action

against him is denied.

II. Motion to Dismiss or Transfer Second through Fifth Causes of

Action

If a case is filed in an improper district, the district in

which it is filed “shall dismiss, or if it be in the interest of

justice, transfer such case to any district or division in which it

could have been brought.” 28 U.S.C. § 1406(a). When jurisdiction

is not based solely on diversity of citizenship, venue is proper

in:

(1) a judicial district where any defendant resides, if

all defendants reside in the same state,

(2) a judicial district in which a substantial part of

the events or omissions giving rise to the claim

occurred, or a substantial part of the property that is

the subject of the action is situated, or

(3) a judicial district in which any defendant may be

found, if there is no judicial district in which the

action may otherwise be brought.

28 U.S.C. § 1391(b).

Nolin argues that venue is not proper in this district.

Because the Court has already resolved most of this case in

Plaintiffs' favor, Nolin argues, the only claim that remains is

Plaintiffs' claim for fraudulent transfer. He notes that any such

transfers occurred entirely in the Central District of California. 

Plaintiffs counter that venue is proper in this district for

two reasons. First, 28 U.S.C. § 1391(c) provides, "For purposes of

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venue . . . a defendant that is a corporation shall be deemed to

reside in any judicial district in which it is subject to personal

jurisdiction at the time the action is commenced." Plaintiffs

argue, and the Court agrees, that Defendant Advance is subject to

personal jurisdiction in this district. Plaintiffs also correctly

argue that their fraudulent transfer claims against Defendants

Nolin and Advance arise directly out of Defendant Advance's

contacts with the Trust in this district. 

Citing a Northern District of Illinois case, Nolin argues that

the Court "should not exercise pendent venue over Plaintiffs' state

law claims." Reply at 8, citing De La Fuente v. I.C.C., 451 F.

Supp. 867, 870-71 (N.D. Ill. 1978). Nolin arguees that De La

Fuente stands for the proposition that a court should not exercise

pendent venue over a new party for whom venue is otherwise not

proper. However, De La Fuente is distinguishable from this case. 

Unlike De La Fuente, there is a convergence of interests between

the Defendants because Defendant Nolin is the sole shareholder and

CEO of Defendant Advance. Further, the De La Fuente court

considered an earlier version of 28 U.S.C. § 1391(b), which

provided, "A civil action wherein jurisdiction is not founded

solely on diversity of citizenship may be brought only in the

judicial district where all defendants reside, or in which the

claim arose, except as otherwise provided by law." (emphasis added) 

The current version of the statute allows venue "where any

defendant resides, if all defendants reside in the same state." 28

U.S.C. § 1391(b)(1) (emphasis added). Further, Nolin cannot and

does not argue that venue is improper in this district for the

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Plaintiffs' sixth cause of action against him. Because the Court

denies Defendants' motion to dismiss that claim, venue in this

Court is proper even under the De La Fuente standard.

The Court denies Nolin's motion to dismiss or transfer based

on improper venue. 

CONCLUSION

For the foregoing reasons, the Court DENIES Defendant Nolin's

motion to dismiss or transfer (Docket No. 205). Defendant Nolin

shall answer the complaint within ten days of the date of this

order. Fed. R. Civ. P. 12(a)(4)(A). 

IT IS SO ORDERED.

12/26/07

Dated: ________________________ 

CLAUDIA WILKEN

United States District Judge

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