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Groden v. N&D Transportation Co., Inc.

United States Court of Appeals, First Circuit

August 2, 2017



          Melissa A. Brennan, with whom Catherine M. Campbell and Feinberg, Campbell & Zack, PC were on brief, for appellant.

          Oleg Nikolyszyn for appellees Laurent J. Duhamel and Elizabeth A. Duhamel.

          Robert A. Mitson, with whom Mitson Law Associates was on brief, for all appellees.

          Before Torruella, Lipez, and Barron, Circuit Judges.

          LIPEZ, Circuit Judge.

         In this appeal, we consider whether the Supreme Court's decision in Peacock v. Thomas, 516 U.S. 349 (1996), requires dismissal of a pension fund's lawsuit against an employer's alleged alter egos. Specifically, we must decide whether there is federal subject matter jurisdiction for the fund's suit seeking $1.2 million in unpaid withdrawal liability that previously was assessed against the employer in a default judgment. The pension fund's manager, appellant Edward F. Groden, maintains that subject matter jurisdiction exists under the Employee Retirement Income Security Act of 1974 ("ERISA"). Concluding otherwise, the district court dismissed the case and subsequently denied appellant's motion for post-judgment relief. Having carefully reviewed the law and the fund's allegations, we vacate the court's post-judgment ruling and remand the case for further proceedings.


         A. Background

         In September 2012, the New England Teamsters and Trucking Industry Pension Fund ("the Fund") secured a default judgment in federal court against D&N Transportation, Inc. ("D&N") for unpaid withdrawal liability the company owed, pursuant to ERISA as amended by the Multiemployer Pension Plan Amendments Act ("MPPAA"), when it ceased operations.[1] See 29 U.S.C. §§ 1132(e); 1381; 1451.[2] Defendants Laurent and Elizabeth Duhamel ("the Duhamels"), who are husband and wife, were D&N's sole stockholders during the company's forty-odd years in business. Eighteen months after the default judgment, with no payments having been made, the Fund filed a new complaint -- i.e., this action -- against the Duhamels, N&D Transportation, Inc. ("N&D"), and JED Realty Associates, LLC ("JED Realty"), seeking to hold them liable for the withdrawal liability.

         The Fund claimed, inter alia, that the Duhamels and N&D, a corporation owned by their two children (Nancy Belsito and David Duhamel), are alter egos of D&N and, accordingly, are equally responsible for the unpaid ERISA obligation. The Fund also alleged that JED Realty, another business owned by David Duhamel, is an alter ego of N&D and, as such, is likewise responsible for the D&N debt. In support of its alter ego contentions, the Fund asserted, inter alia, that the operations of D&N and N&D overlapped in significant respects, including use of the same office space and telephone number, joint insurance coverage, linked bank accounts, and shared employees.[3] Put simply, the Fund alleges that D&N and N&D were, in practical effect, the same entity, with "common ownership, management, business purpose, customers, employees and operation." In addition, the Fund claims that the Duhamels as individuals took "functional[] control" of D&N's assets when they sold the company's building to JED Realty and assigned the mortgage on the property to themselves personally. Langone v. N&D Transp. Co. ("Langone I"), No. 1:14-cv-11028-RWZ, Mem. Dec. at 2 (D. Mass. Aug. 27, 2015). The Fund's first amended complaint includes two counts stemming from this transaction, one alleging a fraudulent transfer and the other seeking to reach and apply the funds owed by JED Realty to the Duhamels.

         The defendants moved to dismiss the amended complaint pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). Citing the Supreme Court's decision in Peacock, which we describe below, defendants argued that suits premised on an alter ego theory or based on piercing a corporate veil do not present a federal question. They also invoked Futura Development of Puerto Rico, Inc. v. Estado Libre Asociado De Puerto Rico, 144 F.3d 7 (1st Cir. 1998), in which this court rejected an alter ego claim as a basis for ancillary federal jurisdiction. Defendants asserted that the Fund's complaint does not specify any ERISA provision authorizing the Fund to enforce the judgment rendered in the earlier action against third parties. Hence, defendants contended, the complaint should be dismissed for lack of federal subject matter jurisdiction and because it failed to state a claim for which relief could be granted. Defendants also challenged the fraudulent transfer claim on multiple additional grounds, including that it was untimely.

         B. The District Court's First Ruling

         The district court initially granted the defendants' motion to dismiss based on the factual inadequacy of the complaint. Langone I, at 8-9. Although the court noted differences among the circuits as to when federal subject matter jurisdiction exists for "a follow-on suit to collect an ERISA judgment from an alleged alter ego of a judgment-debtor, " id. at 7, the court sidestepped that legal issue because it found the Fund's allegations insufficient to support an inference that any defendant was D&N's alter ego at the time D&N violated ERISA, id. at 8-9.[4] The court thus dismissed the alter ego counts (Counts I, II, and V) for failure to state a claim, and it declined to exercise supplemental jurisdiction over the state law fraudulent-transfer and reach-and-apply claims (Counts III and IV).[5]

         The Fund responded by filing a motion for relief from judgment under Federal Rule of Civil Procedure 60(b)(6) or, alternatively, to amend the judgment under Rule 59(e). The Fund argued, inter alia, that the district court had misconstrued ERISA case law and that, under the correct analysis, the Fund could "easily remed[y]" its failure to allege the pertinent timing through an amendment to its complaint. The court committed legal error, according to the Fund, by holding that a valid ERISA claim requires a showing that the defendants were plan fiduciaries. The Fund also pointed to the court's incorrect statement that its first amended complaint did not allege that N&D is an "employer" within the meaning of ERISA. See 29 U.S.C. §§ 1002(5), 1301(b), 142(1), 152(2), (6), (7). The Fund did not object, however, to dismissal of the alter ego claim against the Duhamels personally (Count II).[6]

         C. The District Court's Second Ruling

         The district court denied the Fund's post-judgment motion, finding no basis for setting aside the judgment under Rule 60(b)[7] or modifying the decision under Rule 59(e)[8]. Langone v. N&D Transp. Co. ("Langone II"), No. 1:14-cv-11028-RWZ, Mem. Dec. at 7 (D. Mass. Nov. 18, 2015). With respect to the former, the court refuted the Fund's assertion that the decision should be vacated because the court had committed legal error in holding that ERISA alter ego claims require an allegation of fiduciary status. To the contrary, the court stated, it had merely identified fiduciary status as one alternative prerequisite for an ERISA claim, along with a breach of duty under an ERISA plan or alter ego status at the time the primary actor violated ERISA. The court clarified that it had dismissed the alter ego claims because the Fund had not adequately alleged any of those grounds for ERISA liability. Id. at 5. The court thus found no "extraordinary circumstances" to justify vacating the prior judgment. Id.

         The court also refused to alter its judgment so that the Fund could file an amended complaint. Id. at 7. Relying on Peacock and Futura Development, the court ruled that, even with the proposed new timing allegation, the ERISA claims "would not provide a basis for federal jurisdiction." Id. at 6-7.

         On appeal, the Fund's primary argument is that the district court erred as a matter of law in finding that its alter ego claims (Counts I and V) would not fall within the federal courts' subject-matter jurisdiction even if the complaint were amended to allege that N&D was the alter ego of D&N at the time the latter withdrew from the Fund and violated ERISA.[9] The Fund also argues that the district court should have granted its motion to amend the complaint to cure the temporal deficiency and erroneously declined to exercise supplemental jurisdiction over its state-law ...

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