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UNITE National Retirement Fund v. Rosal Sportswear

September 14, 2007

UNITE NATIONAL RETIREMENT FUND, F/K/A ILGWU NATIONAL RETIREMENT FUND AND EDGAR ROMNEY AND STEVEN THOMAS AS TRUSTEES OF THE UNITE NATIONAL RETIREMENT FUND, PLAINTIFFS,
v.
ROSAL SPORTSWEAR, INC., ROSE BONI, A/K/A ROSA BONI, CATALDO BONI A/K/A ALDO J. BONI, TONIA BONI, LORENA BONI AND PAT BONI DEFENDANTS.



The opinion of the court was delivered by: A. Richard Caputo United States District Judge

(JUDGE CAPUTO)

MEMORANDUM

Presently before the Court is a motion to dismiss and for a more definite statement of Plaintiffs UNITE National Retirement Fund, Edgar Romney, and Steven Thomas' Complaint (Doc. 1) filed by Defendants Rose Boni, Cataldo Boni, Tonia Boni, Lorena Boni, and Pat Boni. (Doc. 7.) Because Plaintiffs' state law claims in Counts IV through IX are preempted by ERISA; Plaintiffs were not required to provide notice of withdrawal liability to the individual Defendants; the Court has supplemental jurisdiction over the veil-piercing claim in Count I; a disputed issue of material fact exists as to whether the Wildwood rental property is a "trade or business;" and no heightened pleading is required for Plaintiffs' ERISA claims and their Complaint meets the notice pleading requirements of Federal Rule of Civil Procedure 8(a), the motions will be granted in part and denied in part.

The Court has jurisdiction over the claims in Counts I through III arising under federal law pursuant to 28 U.S.C. §§ 1331 and 1337, and the Court exercises supplemental jurisdiction over Plaintiffs' state law claims in Count I and Counts IV through IX pursuant to 28 U.S.C. § 1367.

BACKGROUND

On April 25, 2007, Plaintiffs filed their Complaint, in which they allege the following: Plaintiff UNITE National Retirement Fund is a multiemployer employee pension benefit plan within the meaning of Sections 3(2) and (37) of the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended, 29 U.S.C. § 1002(3) and (37). (Compl., Doc. 1 ¶ 8.) Plaintiffs Edgar Romney and Steven Thomas are trustees and fiduciaries of the fund who are authorized to bring civil actions on behalf of the fund, its participants, and beneficiaries, for the purpose of collecting withdrawal liability. (Id. ¶¶ 10-11.)

Defendant Rosal Sportswear, Inc. ("Rosal") is a Pennsylvania corporation, which at all relevant times had its principal place of business in Lehighton, Pennsylvania. (Id. ¶ 12.) Defendant Rose Boni was at all relevant times the sole shareholder and chief executive officer of Rosal. (Id. ¶ 13.) Defendant Cataldo Boni is the brother of Rose Boni*fn1 , Defendants Tonia Boni and Lorena Boni are the daughters of Rose Boni, and Defendant Pat Boni is the son of Rose Boni. (Id. ¶¶ 14-17.)

Pursuant to Defendant Rosal's collective bargaining agreement with a local affiliate of the International Ladies' Garment Workers' Union, the corporation was required to make contributions to the pension fund on behalf of its employees and was an employer within the meaning of section 3(5) of ERISA. (Id. ¶¶ 19-20.) In or about September of 2002, Rosal permanently ceased its manufacturing operations, effecting a "complete withdrawal" from the pension fund, by which it became liable to the fund for withdrawal liability under section 4201(a) of ERISA. (Id. ¶¶ 21-22.) The pension fund calculated Rosal's withdrawal liability to be two hundred twenty-six thousand and eighty-six dollars ($226,086.00) and sent written notice of that amount and a demand for payment to Rosal on or about March 6, 2003. (Id. ¶¶ 23-24.) Rosal failed to pay or to exercise its options under ERISA of requesting a review of the fund's determination within ninety (90) days of receiving the notice of liability or initiating arbitration within one hundred twenty (120) days. (Id. ¶¶ 25, 27.) The pension fund gave proper written notice to Rosal of its default in payment. (Id. ¶ 26.)

The pension fund then commenced a civil action in the United States District Court for the Southern District of New York to recover the withdrawal liability, along with interest, statutory liquidated damages, attorneys fees, and costs, but after service of process, Rosal failed to appear, answer, or defend this civil action. (Id. ¶¶ 28-29.) As a result, on March 4, 2004, the court entered a Judgment in Default against Rosal for the liability and interest accrued to date, which equaled two hundred fifty thousand, nine hundred seventy-two dollars and thirty-two cents ($250,972.32), plus post-judgment interest. (Id. ¶ 29.) On May 10, 2004, the judgment against Rosal was entered on the docket of the United States District Court for the Eastern District of Pennsylvania, and the pension fund then commenced supplemental proceedings in that court to locate assets of Rosal and related entities and individuals to satisfy the judgment. (Id. ¶¶ 31-32.) In the course of those supplemental proceedings, Plaintiffs discovered that Rosal no longer has any assets or property of record. (Id. ¶¶ 33-34.)

Plaintiffs also discovered in the course of those proceedings that after September of 2002, Defendant Rose Boni caused all the remaining assets of Rosal, an amount in excess of one hundred eighty-five thousand dollars ($185,000.00), to be transferred to herself and to Defendants Cataldo Boni, Tonia Boni, and Pat Boni. (See id. ¶¶ 36-41, 50.) Additionally, between January 1 and September 30 of 2002, she caused assets of Rosal totaling approximately one thousand four hundred dollars ($1,400.00) to be transferred to Defendant Lorena Boni and an additional eighteen thousand five hundred dollars ($18,500.00) to Defendant Tonia Boni. (See id. ¶¶ 80, 89-90.) Plaintiffs claim that these distributions were in excess of any reasonable compensation for services rendered and were unsupported by any valid and adequate consideration. (See id. ¶¶ 79, 89, 99, 109, 119.) These distributions were made to insiders while the corporation was failing to pay its debts when due, while the assets of the corporation, at fair valuation, were less than its debts, and while or shortly before the corporation became insolvent. (Id. ¶¶ 81-84, 91-94, 101-104, 111-114, 121-124.)

Defendants Rose Boni, Cataldo Boni, Tonia Boni, and Pat Boni were aware or should have been aware that the transfers to them would prevent Rosal from paying all or part of Rosal's withdrawal liability to the pension fund and that the transfers would prefer those Defendants over the pension fund and other creditors of Rosal. (Id. ¶ 61.) Plaintiffs aver that a principal purpose of the transfers was to avoid paying withdrawal liability to the pension fund and that they were made with the intent to defraud the pension fund (Id. ¶¶ 62, 67.)

At all relevant times, Defendant Rose Boni disregarded the corporate separateness between herself and Rosal and operated Rosal as an alter ego and single employer with herself, and with several other entities that she owned and directly controlled, including a real estate rental trade or business in Wildwood, New Jersey, which was under common control with Rosal pursuant to section 4001(b)(1) of ERISA and section 414(c) of the Internal Revenue Code of 1986, as amended, and regulations promulated thereunder. (Id. ¶¶ 43-44, 57-59.) Defendant Rose Boni, at all relevant times, treated the corporate assets of Rosal as her personal assets, regularly used them for the personal benefit of herself and the other insider Defendants, wrote off or forgave substantial debts that she owed to Rosal without providing any fair or equivalent consideration to Rosal, caused Rosal to be under-capitalized or to become insolvent and judgment-proof, and caused assets of Rosal to be diverted in order to avoid or delay the pension fund's collection of its withdrawal liability. (Id. ¶¶ 45-52.) Defendant Rose Boni, as sole officer, director, and shareholder of Rosal, had control over the corporation's liquidation, and she improperly took advantage of her knowledge and power as a corporate officer and director to prefer herself and the other insider Defendants over the pension fund. (Id. ¶¶ 69-70.)

Plaintiffs allege violations of ERISA in Counts I, II, and III, and violations of Pennsylvania state law, including the Pennsylvania Uniform Fraudulent Transfer Act, in Counts IV through IX. Defendants filed a motion to strike Counts I and II and to dismiss Counts IV through IX for failure to state claims upon which relief can be granted, and for a more definite statement concerning the alleged transfer of assets that form the basis for Counts I through IX. (Defs.' Mot. to Dismiss & for More Definite Statement, Doc. 7.) The motion is fully briefed and ripe for disposition.

LEGAL STANDARD

Rule 12(b)(6) of the Federal Rules of Civil Procedure provides for the dismissal of a complaint, in whole or in part, for failure to state a claim upon which relief can be granted. Dismissal is appropriate only if, accepting as true all the facts alleged in the complaint, Plaintiff has not plead "enough facts to state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, 550 U.S. ----, 127 S.Ct. 1955, 1960, 167 L.Ed.2d 929 (2007) (abrogating "no set of facts" language found in Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d. 80 (1957)). As a result of the Twombly holding, Plaintiffs must now nudge their claims "across the line from conceivable to plausible" to avoid dismissal. Id. The Supreme Court noted just two weeks later in Erickson v. Pardus, --- U.S. ----, 127 S.Ct. 2197, 2200, 167 L.Ed.2d 1081 (2007) (per curiam), that Twombly is not inconsistent with the language of Federal Rule of Civil Procedure 8(a)(2), which requires only "a short and plain statement of the claim showing that the pleader is entitled to relief." Specific facts are not necessary; the statement need only " 'give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.' " Id. (citing Twombly, 127 S.Ct. at 1959 (quoting Conley, 355 U.S. at 47)).

There has been some recent guidance from the Courts of Appeals about the apparently conflicting signals of Twombly and Erickson. The Second Circuit Court of Appeals reasoned that "the [Supreme] Court is not requiring [in Twombly] a universal standard of heightened fact pleading, but is instead requiring a flexible 'plausibility standard,' which obliges a pleader to amplify a claim with some factual allegations in those contexts where such amplification is needed to render the claim plausible." Iqbal v. Hasty, 490 F.3d 143, 157-58 (2d Cir. 2007) (emphasis in original). Similarly, the Seventh Circuit Court of Appeals stated that "[t]aking Erickson and Twombly together, we understand the Court to be saying only that at some point the factual detail in a complaint may be so sketchy that the complaint does not provide the type of notice of the claim to which the defendant is entitled under Rule 8." Airborne Beepers & Video, Inc. v. AT&T Mobility LLC, - F.3d -, 2007 WL 2406859, at *4 (7th Cir. Aug. 24, 2007).

Until further guidance, this Court will follow the guidance of the Second and Seventh Circuit Courts of Appeals, and apply a flexible "plausibility" standard, on a case-by-case basis, in those contexts in which it is deemed appropriate that the pleader be obliged to amplify a claim with sufficient factual allegations.

In deciding a motion to dismiss, the Court should consider the allegations in the complaint, exhibits attached to the complaint and matters of public record. See Pension Benefit Guar. Corp. v. White Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir. 1993), cert. denied, 510 U.S. 1042 (1994). The Court may also consider "undisputedly authentic" documents where the plaintiff's claims are based on the documents and the defendant has attached a copy of the document to the motion to dismiss. Id. The Court need not assume that the plaintiff can prove facts that were not alleged in the complaint, see City of Pittsburgh v. West Penn Power Co., 147 ...


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