may result in payment even after retirement does not mean the Plan constitutes an "employee pension benefit plan." As such, count one will be dismissed because the Plan does not fall within the purview of ERISA.
C. Count VIII - Violation of ERISA in Connection with Medical Plan
Plaintiffs have also filed a second claim under ERISA alleging that defendants terminated the medical plan without prior notice in violation of the terms of the medical plan, and also failed to reimburse participants who incurred claims prior to termination but that were received by Defendants after the dates of termination. Plaintiffs also allege that Defendants did not notify them about the termination of the plan until nearly two weeks after they took action.
Defendants seek dismissal of this claim on the basis that no harm has been alleged by Plaintiffs. In the complaint, Plaintiffs state that coverage was terminated on April 28, 1993. However, Defendants assert that both Catherine Killian and Richard Grossberg could not have been harmed by the termination of coverage and the delay in notification because both employees had already terminated their employment prior to that date. Further, both Plaintiffs were no longer covered by the medical plan on April 28th because it only afforded coverage until the last day of the month in which employment was terminated. Grossberg left in March 1993, therefore his coverage ended on March 31, 1993. While Plaintiff Killian left her employment in April, 1993, she does not allege any damage in the complaint as a result of Defendants terminating the medical plan without first notifying her, or by delaying notification.
However, Defendants ignore the fact that the complaint clearly states that "many of the members of the class, including plaintiff Grossberg herein, have unpaid and substantial medical bills which should have been paid pursuant to the Medical Plan and/or COBRA coverage." Amended complaint, § 103. As such, Defendants' first argument is completely without merit.
Defendants also assert that the claim should be dismissed because it fails to adequately specify which Defendants initiated the action complained of in the complaint. As a preliminary matter, we note that it is clear that an individual who is acting as a director or officer of a corporation cannot be held personally liable under ERISA, absent an allegation that the corporate veil should be pierced. Solomon v. Klein, 770 F.2d 352 (3rd Cir. 1985); IUE AFL-CIO Pension Fund v. Locke Machine Co., 726 F. Supp. 561 (D.N.J. 1989); Galgay v. Gangloff, 677 F. Supp. 295, 298 (M.D. Pa. 1987). In this case, Plaintiffs have alleged that the corporate veil should be pierced, and that liability should be imposed on the individual Defendants.
We must therefore address whether Plaintiffs' allegations are sufficient to state a claim for piercing the corporate veil before we determine whether Plaintiffs' claim is sufficient for pleading purposes.
In order to pierce the corporate veil in the Third Circuit, the following must be shown: gross undercapitalization, non-payment of dividends, failure to observe corporate formalities, siphoning of the corporate funds by the dominant shareholder, insolvency of the debtor corporation, absence of corporate records, non-functioning of other officers or directors, and that the corporation is merely a facade for the operations of the dominant shareholders. American Bell, Inc. v. Federation of Telephone Workers, 736 F.2d 879, 886 (3rd Cir. 1984); United States v. Pisani, 646 F.2d 83, 88 (3rd Cir. 1981). One need not allege all the above factors in order to prove his claim, nor is this list exclusive. Galgay, 677 F. Supp. at 299. Moreover, the corporate form will only be disregarded in specific, unusual circumstances where it is necessary to prevent illegality, injustice or fraud, or where recognition of the corporate entity would defeat public policy. American Bell, 736 F.2d at 886; Pisani, 646 F.2d at 88 n.5.
In Galgay, the court held that plaintiffs' allegations survived a motion to dismiss where they alleged that defendants (various enterprises) all conducted the same or similar business, shared assets and employees with one another, operated out of the same office and were each controlled by one person. The court stated that while plaintiffs' allegations were limited in both number and scope, it could not find that plaintiffs had stated no set of facts which would entitle them to relief. Galgay, 677 F. Supp. at 300. The court also noted that defendants were free to challenge the applicability of this ruling later on once a proper factual foundation had been established. Id. On the other hand, in United States v. Atlas Minerals and Chemicals, Inc., 1993 U.S. Dist. LEXIS 18411, No. Civ. A. No. 91-5118, 1993 WL 518421 (E.D. Pa. Dec. 7, 1993), the court held that no such claim was adequately pled where all that was alleged was that "Kleinert's, Inc. and/or its predecessors-in-interest arranged for disposal, or arranged for a transporter for transport for disposal, at the site. . . . Kleinert's, Inc. has assumed the liabilities of Brierwood Shoe. . . .Kleinert's, Inc. is responsible for the conduct and liabilities of Kleinert's, Inc., Brierwood Shoe." Id. 1993 U.S. Dist. LEXIS 18411, *17. The court noted that there were no allegations of control, fraud or of a sham corporation to put Kleinert's on notice of plaintiffs' theory.
In the present case, plaintiffs allege the following:
Defendants, as the sole owners and high ranking officers of Nutri/System, conducted the affairs of Nutri/System in disregard for the corporate form. Plaintiffs are entitled to pierce the corporate veil, since there was insufficient corporate capitalization, personal use of corporate assets, and control by defendants only as dominant shareholders. Moreover, defendants were personally and unjustly enriched by plaintiffs' and the class' efforts. Defendants were paid exorbitant salaries and enjoyed other benefits, due in large part to the efforts of plaintiffs and the class, and at absolutely no risk to defendants. Defendants initially purchased Nutri/System in a 1986 leveraged buyout with little or none of their own capital assets. Defendants, in fact, have invested little or none of their own capital or assets in the company. While little or nothing of their own was put at risk, defendants placed employees' livelihoods at risk by their conduct which has resulted in serious financial harm for plaintiffs and the class.
Amended complaint, §§ 95, 96.
While the allegations of piercing the corporate veil are rather brief in this case, we cannot say that the claim fails to give Defendants notice of Plaintiffs' claim. See Usery v. Chef Italia, 540 F. Supp. 587, 591 n. 11 (E.D. Pa. 1982) (stating that the purpose of a pleading is to inform a party of the nature of the claims being asserted against him or her, and the relief sought, and that technicalities are no longer as important as they once were under the rules). In the above claim, Plaintiffs allege several factors which are necessary in order to state a claim for piercing the corporate veil - that Defendants used the corporation's assets for their own personal use, that the corporation was undercapitalized, that the corporation was controlled by dominant shareholders, and that an injustice in the form of unjust enrichment occurred. Further, Plaintiffs incorporated paragraphs 1-33 of the complaint in Count VIII, where they also allege that Nutri/System filed for bankruptcy. Amended complaint, § 32. Construing all of the allegations together, Plaintiffs have also alleged that the debtor corporation was insolvent. Therefore, assuming Plaintiffs' allegations to be true, we cannot say that Plaintiffs have failed to allege any facts that would entitle them to pierce the corporate veil. As such, Count VIII is sufficient because it states an adequate claim against Defendants.
Finally, we address Defendants' objection that the complaint fails to specify which of the Defendants initiated the actions complained of; rather, the complaint only identifies "the defendants." Nonetheless, the parties are only at the pleading stage, and it is possible that Plaintiffs may not know which Defendant actually took the above actions until discovery is conducted. See Petro-Tech, Inc. v. Western Co. of North America, 824 F.2d 1349, 1362 (3rd Cir. 1987); In Re Meridian, 772 F. Supp. 223, 230 (E.D. Pa. 1991) (holding plaintiffs need not identify specific acts of each individual defendant at this point of litigation). Thus, since Count VIII is sufficient in all other respects, we do not think it is necessary to dismiss Count VIII under these circumstances. Moreover, we note that Defendants still have adequate notice of Plaintiffs' claims, and they can simply deny the allegations if they do not pertain to certain individuals. As such, Defendants' objection is without merit.
D. Count Three: Breach of Contract
In count three, Plaintiffs assert a claim for breach of contract. An individual officer, however, is generally not liable for the breach of a contract by a corporation. Pell v. Weinstein, 759 F. Supp. 1107, 1115 (M.D. Pa. 1991), aff'd, 961 F.2d 1568 (3rd Cir. 1992). Where a party contracts with a corporation through an agent who acts within the scope of his authority and reveals his principal, the corporate principal is alone liable for the breach of contract. Id. quoting Daniel Adams Associates v. Rimbach Publishing, Inc., 360 Pa. Super. 72, 79-80, 519 A.2d 997, 1000-01 (1987), allocatur denied, 517 Pa. 597, 535 A.2d 1056 (1987).
Pennsylvania courts have discarded the corporate form when it was necessary to avoid an injustice. Wheeling-Pittsburgh Steel Corp. v. Intersteel, Inc., 758 F. Supp. 1054, 1059 (W.D. Pa. 1990). However, piercing the corporate veil is the exception, and courts should start from the general rule that the corporate entity should be upheld unless specific, unusual circumstances call for an exception. First Realvest, Inc. v. Avery Builders, Inc., 410 Pa. Super. 572, 600 A.2d 601, 604 (1991).
Defendants now seek to dismiss count three on the ground that Plaintiffs have pled insufficient facts to pierce to corporate veil. While we previously addressed this argument in conjunction with Count VIII of the complaint and found it to be sufficient under federal law, we note that we must look to Pennsylvania law to determine if Plaintiffs' allegations are sufficient to state a claim in Count III as the underlying claim (breach of contract) deals with Pennsylvania law. See Kleinknecht v. Gettysburg College, 989 F.2d 1360, 1365 (3rd Cir. 1993).
In order to pierce the corporate veil in Pennsylvania, courts look at several different factors:
1) whether or not corporate formalities were observed and corporate records were kept; 2) whether other corporate officers and directors existed other than the shareholder; and 3) whether the dominant shareholder has used the assets of the corporation for his own personal use. Lynch v. Janson, 1990 U.S. Dist. LEXIS 15913, Civ. A. No. 90-5063, 1990 WL 188926, at 7 (E.D. Pa. Nov. 28, 1990); Village at Camelback Prop. Owners Ass'n, Inc. v. Carr, 371 Pa. Super. 452, 461, 538 A.2d 528, 533 (1988), allocatur granted, 519 Pa. 668, 548 A.2d 257 (1988). Further, the corporate veil will be pierced only where it is alleged that the corporation was being used to perpetrate a fraud or a crime, or where it is necessary to avoid injustice. Carr, 371 Pa. Super. at 462, 538 A.2d at 533 (citing Rinck v. Rinck, 363 Pa. Super. 593, 597, 526 A.2d 1221, 1223 (1987)).
In Carr, the court held that the complaint, when read as a whole, stated sufficient allegations to pierce the corporate veil. In Carr, the plaintiff alleged that:
a) the corporations were insufficiently capitalized at the outset; b) there was an intermingling of funds between and among the corporations as well as with personal assets of Defendant Carr; c) other officers and directors, if any, of the corporations were not functioning; d) the corporations failed to observe corporate formalities; e) the corporations did not pay dividends in the regular and ordinary course of their business; and f) in conducting the business affairs of the corporations Defendant Carr consistently held himself out as individually conducting such affairs without use of the corporate names and without identifying that his actions were taken as an officer or employee of the corporation.