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Barnett v. Platinum Equity Capital Partners II, L.P.

United States District Court, W.D. Pennsylvania

July 27, 2017



          Lisa Pupo Lenihan Magistrate Judge

         Currently pending before the Court is Plaintiffs' Motion to Dismiss Defendants' Amended Counterclaim (ECF No. 20). In this ERISA action, Plaintiffs seek payment of deferred bonuses allegedly due them under two phantom stock plans with their former employer. Defendants[1] have brought a counterclaim against Plaintiffs seeking a declaratory judgment which asks the Court to interpret the agreements between the parties and find that Plaintiffs failed to satisfy an express condition precedent, thereby forfeiting their bonuses. Plaintiffs have moved to dismiss the counterclaim because they submit that the issues raised in the counterclaim are subsumed by the original pleadings. For the reasons set forth below, the Court will grant Plaintiffs' Motion to Dismiss the Amended Counterclaim.


         Plaintiffs/Counterclaim Defendants, David L. Barnett and James R. Workman, Jr., were employees of Maxim Crane Works (“Maxim”), the successor by merger to Defendant/Counterclaim Plaintiff, Steelers Holding Corporation (“Steelers”). (Am. Compl., ¶ 14, ECF No. 9; Am. Ctrclm., ¶ 10 (ECF No. 18).) Barnett was employed by Maxim from before 2008 through and including April 4, 2014. (Am. Ctrclm., ¶ 12.) Workman was employed by Maxim from before 2008 through and including December 31, 2012. (Id. at ¶ 13.)

         Also named as Defendants and Counterclaim Plaintiffs are Platinum Equity Capital Partners II, L.P. (“Platinum Capital”) and Platinum Equity Advisors, LLC (“Platinum Advisors”) (together the “Platinum Defendants), and the Steelers Holding Corporation 2008 Management Participation Plan (the “Management Plan”). (Am. Compl., ¶¶ 6-7, 10; Am. Ctrclm., ¶¶ 8-9, 11.) The Management Plan is an incentive compensation benefit plan. (Am. Ctrclm., ¶ 11.)

         In July of 2008, Barnett and Workman each executed an Employment Agreement which provided, among other things, that “[each] shall be entitled to participate in [the 2008 Management] Participation Plan at a level to be agreed upon and appropriate to his office and on terms and conditions no less favorable to [them] than other senior executive officers participating in such Participation Plan.” Barnett Empl. Agrmt., ¶3(f), Tab A to Defs.' Am. Ctrclm. (ECF No. 18-1 at 4); Workman Empl. Agrmt., ¶ 3(f), Tab B to Defs.' Am. Ctrclm. (ECF No. 18-1 at 15).[2] The Employment Agreement provides that:

This Agreement, together with any other written agreements between Executive and [Maxim] or one or more of its affiliates of even date herewith (that are being entered into in anticipation of the Merger), . . . and the terms of the Participation Plan referred to in Section 3(f) embody the complete agreement and understanding between Executive, one the one hand, and [Maxim, Steelers] and their respective affiliates, on the other hand, and supersede and preempt any prior understandings, agreements, written or oral, which may have related to Executive's employment by [Maxim]or any of its affiliates in any way, including, without limitation, any prior employment agreement with [Maxim] or any of its Affiliates to which Executive may have been a party.”

         Barnett Empl. Agrmt., ¶ 14. Counterclaim Plaintiffs refer to the Employment Agreements and the other agreements referenced in paragraph 14 above as the “Complete Agreements” between the parties. (Am. Ctrclm., ¶ 1.)

         The Management Plan states that its purpose “is to provide incentive compensation to key employees of Steelers . . . and its subsidiaries[, and] . . . shall be based upon the award of Performance Units, the value of which is related to the appreciation in the value of [Steelers].” (Mgmt. Plan, ¶ 1, Ex. 1 to Am. Compl. (ECF No. 9-1 at 1).) The Management Plan further provides that incentive compensation “shall be payable to participants upon the occurrence of certain Qualifying Events.” Id. It is undisputed that a Qualifying Event, as defined in the Management Plan, occurred here: On July 29, 2016, a notice was sent to former Maxim employees possessing Performance Units in the Management Plan indicating that a qualifying event-the merger by Maxim, Steelers, and Platinum Advisors-had occurred. (Am. Compl., ¶¶ 60-61 (citing 7/29/16 Notice to Former Maxim Employees, Ex. 8 attached to Am. Compl. (ECF No. 9-8)).

         However, the Management Plan sets forth several circumstances in which an executive's Performance Units, whether or not fully matured, will be forfeited. (Mgmt. Plan, ¶ 6.2.) Relevant to this case is the requirement set forth in Section 6.2.2 of the Management Plan, which states that all Performance Units will be discontinued and forfeited if “[t]he Participant engages in competition with [Maxim] or violates any agreement with [Maxim] regarding the assignment of rights to [Maxim] or the confidentiality of [Maxim] information.” (Am. Ctrclm., ¶ 17; Mgmt. Plan, § 6.2.2.) Counterclaim Plaintiffs submit that this requirement is a condition precedent to Barnett and Workman receiving the value of their Performance Units in the Management Plan. (Am. Ctrclm., ¶ 17.)

         In July of 2008, Barnett and Workman each received a grant of Management Plan Performance Units. (Id., ¶¶ 19-20.) However, in 2015, both Barnett and Workman accepted employment with direct competitors of Maxim, prior to the occurrence of the Qualifying Event. (Id. at ¶¶ 21-26.) As such, and based on the clear and unambiguous terms of the Complete Agreements, Counterclaim Plaintiffs contend that Barnett and Workman failed to satisfy a condition precedent, and therefore, forfeited their Performance Units in the Management Plan. (Id. at ¶¶ 27-29.)

         For relief, Counterclaim Plaintiffs seek a declaratory judgment declaring that none of them[3] had a contractual duty to pay Barnett and Workman the value of their Management Plan Performance Units at the time of the later Qualifying Event, because neither Barnett nor Workman can satisfy a material and enforceable condition precedent-refraining from engaging in competition with [Maxim]-contained in the Complete Agreements. (Id. at ¶¶ 30, 33, 36; Ctrclm. Cts. I & II, Ad Damnum cl., part F.)[4]


         For purposes of deciding a motion to dismiss under Rule 12(b)(6), claims and counterclaims are treated the same, and therefore, subject to the same standard of review. Red Bend Hunting & Fishing Club v. Range Resources-Appalachia, LLC, Case No. 4:16-CV-00864, 2016 WL 7034686, *3 n. 35 (M.D.Pa. Dec. 2, 2016) (citing Universal Underwriters Co. v. J. Murray Motor Co., Inc., Civ. A. No. 4:11-CV-1851, 2012 WL 12870228, at *1 n. 2 (M.D. Pa. Sept. 12, 2012)). In deciding a motion to dismiss under Rule 12(b)(6), the Courts apply the following standard, as recently reiterated by the Court of Appeals:

A complaint may be dismissed under Rule 12(b)(6) for “failure to state a claim upon which relief can be granted”. . . . “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (citation and internal quotation marks omitted) (emphasis added). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id.; see also Sheridan v. NGK Metals Corp., 609 F.3d 239, 262 n. 27 (3d Cir.2010). Although the plausibility standard “does not impose a probability requirement, ” Twombly, 550 U.S. at 556, 127 S.Ct. 1955, it does require a pleading to show “more than a sheer possibility that a defendant has acted unlawfully, ” Iqbal, 556 U.S. at 678, 129 S.Ct. 1937. A complaint that pleads facts “merely consistent with a defendant's liability . . . stops short of the line between possibility and plausibility of entitlement to relief.” Id. (citation and internal quotation marks omitted). The plausibility determination is “a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Id. at 679, 129 S.Ct. 1937.

Connelly v. Lane Constr. Corp., 809 F.3d 780, 786-87 (3d Cir. 2016).

         In determining whether a counterclaim has been adequately pled, the court must accept as true the factual allegations of the counterclaim and draw all reasonable inferences in the light most favorable to the defendant (counterclaim plaintiff). Assurity Life Ins. Co. v. Nicholas, Civ. A. No. 14-6522, 2015 WL 5737397, *2, E.D.Pa. Oct. 1, 2015) (citing GE Capital Mortg. Servs., Inc. v. Pinnacle Mortg. Inv. Corp., 897 F.Supp. 854, 860 (E.D.Pa. 1995)). The Court may also rely on facts pled in the complaint, but only to the extent that they have been admitted in defendant's answer. See Red Bend Hunting & Fishing Club, 2016 WL 7034686, at *1 n. 10. In addition, the Court may consider any exhibits attached to the complaint (or, in this case, to the counterclaim), and matters of public record, in deciding motions to dismiss. Pension Benefit Guar. Corp. v. White Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir. 1993) (citations omitted). Factual allegations within documents described or identified in the complaint (or, as here, the counterclaims) may also be considered if the claims (or counterclaims) are based upon those documents. Id. A district court may consider these documents without converting a motion to dismiss into a motion for summary judgment. In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997).

         III. ...

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