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Hawaii Masons' Pension Trust Fund v. Global Stone Hawaii, Inc.

United States District Court, D. Hawaii

November 13, 2017

HAWAII MASONS' PENSION TRUST FUND; HAWAII MASONS' AND PLASTERERS' ANNUITY TRUST FUND; HAWAII MASONS' VACATION AND HOLIDAY TRUST FUND; HAWAII MASONS' AND PLASTERERS' APPRENTICESHIP AND TRAINING TRUST FUND; HAWAII MASONS' HEALTH AND WELFARE TRUST FUND, Plaintiffs,
v.
GLOBAL STONE HAWAII, INC.; RENATO FUCHS; DANIEL NELSON; JOHN DOES 1-10; DOE CORPORATIONS 1-10; DOE PARTNERSHIPS 1-10; DOE GOVERNMENTAL AGENCIES 1-10; DOE TRUSTS 1-10, Defendants.

          ORDER GRANTING DEFENDANTS RENATO FUCHS AND DANIEL NELSON'S MOTION TO DISMISS; DENYING DEFENDANTS' REQUEST FOR ATTORNEYS' FEES; AND GRANTING PLAINTIFF HAWAII MASONS' REQUEST FOR LEAVE TO AMEND.

          SUSAN OKI MOLLWAY UNITED STATES DISTRICT JUDGE

         I. INTRODUCTION.

         A group of trust funds (“Hawaii Masons”) alleges that Defendant Global Stone Hawaii, Inc. (“Global Stone”), and two of its officers (Defendants Renato Fuchs and Daniel Nelson) violated the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et. seq. (“ERISA”), by failing to make certain contributions to the funds. Fuchs and Nelson move to dismiss. Hawaii Masons seeks to recover from Fuchs and Nelson in their individual capacities, asserting claims for breach of fiduciary duty, alter ego liability, and constructive trust. Fuchs and Nelson respond that Hawaii Masons' allegations fail as a matter of law, are devoid of factual detail, and are merely conclusory. The court agrees with Fuchs and Nelson and grants the motion to dismiss.

         II. BACKGROUND.

         A. The Complaint.

         Hawaii Masons is the trustee of various trust funds maintained on behalf of Hawaii construction workers (the “Trust Funds”): Hawaii Masons' Pension Trust Fund; Hawaii Masons and Plasterers' Annuity Trust Fund; Hawaii Masons' Vacation and Holiday Trust Fund; Hawaii Masons' and Plasterers' Apprenticeship and Training Trust Fund; and Hawaii Masons' Health and Welfare Trust Fund. ECF 1, PageID # 1. The Trust Funds are jointly trusteed labor-management trust funds maintained under 29 U.S.C. § 186(c)(5) that operate as employee benefit plans. ECF 1, PageID # 3. Hawaii Masons is a fiduciary under ERISA with respect to the Trust Funds. Id. at PageID #s 2, 3. Hawaii Masons' principal offices are in Honolulu, Hawaii. Id. at PageID # 3.

         On June 15, 2017, Hawaii Masons filed a Complaint against Global Stone, Fuchs, and Nelson. Id. at PageID #s 1-2.

         The Complaint states that at all relevant times Global Stone was a Hawaii corporation engaged in an industry affecting commerce under ERISA and the Labor-Management Relations Act (“LRMA”). See Id. at PageID # 4 (citing 29 U.S.C. §§ 1002(5), (11), (12), and 29 U.S.C. § 142(1), (3)). The Complaint alleges that Global Stone agreed to abide by the terms of a Master Agreement Covering the Ceramic Tile, Marble & Terrazzo Trades in the State of Hawaii (the “CBA”) and a Declaration of Trust Agreement connected to each Trust Fund (the “Trust Agreements”). Id. at PageID # 5. The Complaint states that Hawaii Masons is a third-party beneficiary of the CBA. Id. Under the CBA and the Trust Agreements, Global Stone allegedly promised to make monthly contributions to the Trust Funds for employee benefits and for labor performed by covered employees, and to pay liquidated damages in the event of any delinquency. Id. at PageID # 7. Global Stone's payment obligations are allegedly ongoing. Id. at PageID #s 7-8.

         According to the Complaint, Global Stone failed to pay the full contribution amounts from April 2016 to April 2017. Id. at PageID # 7. Global Stone also allegedly failed to pay liquidated damages from August 2012 to October 2012, January 2013 to January 2015, and November 2016 to February 2017. Id. Hawaii Masons seeks to recover the unpaid funds, accrued interest, damages flowing from the nonpayments, and costs and attorneys' fees. Id. at PageID #s 8, 14.

         Fuchs and Nelson are officers of Global Stone and Utah residents. Id. at PageID # 4; see also ECF 15-2, PageID # 68. The Complaint asserts three claims against them: breach of fiduciary duty, constructive trust, and alter ego liability.

         First, the Complaint alleges that “due to breach of fiduciary duties, ” Fuchs and Nelson “should be held personally liable for . . . delinquent contributions and sums owed” by Global Stone under the CBA and Trust Agreements. ECF 1, PageID # 10. To support this claim, the Complaint makes the following specific allegations:

1. “[Fuchs and/or Nelson] is a fiduciary under ERISA because s/he exercised authority or control respecting management or disposition of plan assets.” Id.
2. “The trust fund contributions were and are plan assets at all relevant times as the payment of contributions due from Global Stone to the Trust Funds accrued and w[ere] considered as being held in trust by Global Stone for the benefit of the Trust Funds to whom such contributions are due and payable.” Id. (emphasis omitted).
3. “[Fuchs and/or Nelson] breached his/her fiduciary duties by intentionally failing to report and/or pay the required contributions to Trust Funds and failing to discharge his duties as set forth by ERISA and 29 U.S.C. § 1104(a).” Id. at PageID # 11.

         The Complaint includes no further factual allegations regarding the breach of fiduciary duty claim. See id.

         Second, the Complaint requests that a “constructive trust . . . be imposed upon the assets of” Fuchs, Nelson, and Global Stone. Id. at PageID # 12; see also Id. at PageID # 15. To support this request, the Complaint makes a single allegation: “As a result of” Fuchs and Nelson's “breach of their fiduciary duties of care and loyalty to the participants and beneficiaries of Trust Funds as alleged herein, plan assets have been improperly diverted from Trust Funds to Global Stone and/or” Fuchs and Nelson. Id. at PageID # 11; see also Id. at PageID # 14 (reiterating the allegation that contribution amounts “have been improperly diverted from Plaintiffs to Global Stone and/or” Fuchs and Nelson (emphasis omitted)).

         Third, the Complaint claims that “at all relevant times, Global Stone was the alter ego and/or the mere instrumentality of [Fuchs and Nelson].” Id. at PageID # 12. The Complaint asserts alter ego liability “based on all or some of the following relevant factors”:

a) Undercapitalization
b) Failure to observe corporate formalities
c) Absence of corporate records
d) Insolvency of corporation at time of transaction
e) Siphoning off of funds by the dominant shareholder(s)
f) Shareholders guarantying [sic] corporate liabilities in their individual capacities
g) Nonfunctioning officers or directors
h) Lack of officers or directors
i) Failure to issue stock
j) Absence of consideration for stock
k) Corporation is a facade of the operation of the dominant shareholder(s)
l) Corporation's inability to meet payroll and other obligations
m) Commingling of funds or assets
n) Stripping the corporation of assets in anticipation of litigation
o) Use of the corporate shell to advance purely personal ends
p) Treatment of corporate assets as personal assets
q) Cash advances to shareholders/officers/directors
r) Advances to corporation by shareholders
s) Undocumented loans
t) Use of individual rather than corporate checks and
u) Fraud and misrepresentation with respect to Trust Fund plan assets of which [Fuchs and/or Nelson] was a fiduciary for the employees covered by the Bargaining Agreement and trust agreements.

Id. at PageID #s 12-13.

         The Complaint asserts that, with Global Stone as their alter ago and “instrumentality, ” Defendants Fuchs and Nelson “should be held liable for all the judgments entered in favor of [Hawaii Masons] and/or delinquent contributions or sums owed” under the CBA and Trust Agreements “as a matter of equity and fairness.” Id. at PageID # 13. The Complaint supports this assertion with another list of “factors, ” “all or some” of which are allegedly “relevant”:

a) Nonpayment of trust fund obligations by Global Stone;
b) Violation of statute or public policy;
c) Misrepresentations by Global Stone and/or members/officers/directors; and/or
d) The acting principals of Global Stone[] were responsible for and ratified administrative decisions exercised on behalf of Global Stone, were vested with the authority to exercise discretionary control over the management of the financial responsibilities and business affairs of GLOBAL STONE, and exercised discretionary control over the management of the financial responsibilities and business affairs of GLOBAL STONE including, but not limited to, authorizing and tendering the payment of contributions and withholdings due to the funds pursuant to the Bargaining Agreement and trust fund agreements; and/or
e) The acting principals of Global Stone intentionally misrepresented to Trust Funds the amount of hours worked by its employees by failing to report and/or transmit contributions in a timely fashion to Trust Funds.

Id. at PageID # 14 (emphases omitted). The Complaint includes no further factual allegations concerning any of these “factors.” See id.

         B. Fuchs and Nelson's Motion to Dismiss.

         On September 20, 2017, Fuchs and Nelson moved to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure. ECF 15. Defendants say that the claims against them are deficient because they are “merely conclusory, ” lack “factual allegations, ” and “are not supported by current law.” ECF 15-2, PageID # 68. They point to Ninth Circuit cases that they characterize as holding that “officers of employers are not personally liable when the employer fails to make contributions to ERISA plans.” Id. at PageID # 69; see, e.g., Bos (I) v. Board of Trustees, 795 F.3d 1006, 1009 (9th Cir. 2015) (noting the rule that officers are not liable for company nonpayments because “unpaid contributions by employers to employee benefit funds are not plan assets” covered by ERISA (emphasis added)).

         C. Hawaii Masons' ...


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