# Poe v. United Association of Journeyman and Apprentices of the Plumbing and Pipefitting Industry of the United States of America AFL-CIO Local 198 Health and Welfare Fund

> District Court, M.D. Louisiana · October 1, 2019

URL: https://www.frixlaw.com/law-library/cases/10191118

## Case

- **Court:** District Court, M.D. Louisiana
- **Decided:** October 1, 2019
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10191118

## How later opinions describe it (automated extraction)

- holding that an employee did not reasonably rely on oral representations and informai benefits statements which contradicted the clear and unambiguous terms of an ERISA plan
- holding that written and oral assurances that plaintiff would receive more favorable benefit terms than he actually received did not constitute “extraordinary circumstances.”

## Opinion text

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA

MICHAEL D. POE ET AL. CIVIL ACTION
VERSUS
UNITED ASSOCIATION OF NO.: 18-0667-BAJ-EWD
JOURNEYMAN AND
APPRENTICES OF THE
PLUMBING AND PIPEFITTING
INDUSTRY OF THE UNITED
STATES OF AMERICA AFL-CIO
LOCAL 198 HEALTH AND
WELFARE FUND ET AL.

RULING AND ORDER

Before the Court is the United Association of Journeyman and Apprentices of
the Plumbing and Pipefitting Industry of the United States of America AFL-CIO
Local 198 Union Health and Welfare Fund! and the Local 198 Board of Trustees’
(collectively, “Defendants”) Motion to Dismiss Plaintiffs’ Complaint Pursuant
to FRCP 12(b)(6). (Doc. 19). Oral argument is not necessary. For the reasons
stated below, the court GRANTS in part and DENIES in part Defendants’ motion.

I, BACKGROUND
Plaintiffs worked as employees for the Plumbers and Steamfitters Local No.
106 “Local 106”), a union located in Lake Charles, Louisiana. (Doc. 1 at p. 11). Local
106 maintained the Local 106 Health and Welfare Fund (“106 Fund”), a trust fund

i Hereinafter “Local 198.”

established in Louisiana for the specific purpose of providing ancillary benefits to its
numerous Local 106 members. Ud.) Under the terms of the 106 Fund, Local 106
members were provided Health Reimbursement Accounts (““HRAs”). (fd.) As part of
Local 106 employees’ compensation, contractors made monetary contributions to the
HRAs on behalf of each employee while Local 106 was in existence. Ud.) All
employer/contractor contributions were deposited into individual employee HRAs for
the purpose of paying the medical expenses of individual employees in retirement.
(id.)
In January of 2014, Local 106 merged with Plumbers and Steamfitters Local
No. Local 198 (“Local 198”), which also had a Health and Welfare Fund (“Local 198
Fund’). (Doc. 1 at p. 12). The health and welfare funds of both entities remained
separate. id.) However, in November of 2014, the entities began to consider merging
the Local 106 and Local 198 Funds. A study prepared by a consulting firm revealed
that the Local 198 Fund had a deficit of $330,762, while the Local 106 Fund had net
assets totaling $4,536,316. At a board meeting in December of 2014, the business
manager for Local 198 assured the Trustees of Local 106 that the Local 106 members
would be able to maintain their health reimbursement accounts when the plans
merged. Ud.) By 2015, the Local 106 Fund had grown to ten million dollars in assets.
At that time, a majority of the trustees negotiating the merger voted that five million
dollars would be paid out to Local 106 members, while the remaining funds would be
transferred to the Local 198 Fund. The funds were distributed to Local 106 members
through their HRAs.

Plaintiffs contend that at the time of the merger, Local 198 had not established
HRAs for its preexisting members. (Doc. 1 at p. 15). The new Plan document for the
new Local 198 Plan, which governed pre-existing Local 198 members and former
Local 106 members, provided that Local 106 members’ HRA account balances were
to be carried over to the UA Local 198 Plan. However, Plaintiffs assert that the
attorneys who drafted the Plan also included language indicating that the Board of
Trustees of Local 198 reserved the “right to amend or terminate all or any part of the
HRA at any time for any reason,” despite earlier representations to Local 106
trustees. In July of 2017, the Local 198 Board of Trustees voted to terminate the
HRAs for all Local 198 members. This decision only affected former Local 106
members, because Local 198 members who joined the union prior to the merger did
not have HRA accounts.
Il. LEGAL STANDARDS
A Rule 12(b)(6) motion to dismiss tests the sufficiency of a complaint against
the legal standard set forth in Rule 8, which requires “a short and plain statement of
the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). “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.” Asherofé v.
Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007)). “Determining whether a complaint states a plausible claim for relief [is] ... a
context-specific task that requires the reviewing court to draw on its judicial
experience and common sense.” Jd. at 679. “[FJacial plausibility” exists “when the
plaintiff pleads factual content that allows the court to draw the reasonable inference
,

that the defendant is liable for the misconduct alleged.” Jd. at 678 (citing Twombly,
550 U.S. at 556). Hence, a complaint need not set out “detailed factual allegations,”
but something “more than labels and conclusions, and a formulaic recitation of the
elements of a cause of action” is required. Twombly, 550 U.S. at 555.
Tl. DISCUSSION
A. Claims Based on 29 U.S.C. § 1132(a)(1)(b) (Count I)
Under 29 U.S.C. § 1132(a)(1)(B), a plaintiff may bring a civil action to (1)
recover benefits due to him under the terms of an ERISA plan, (2) enforce his rights
under the plan, (8) or clarify his rights to future benefits under the plan. Plaintiffs
assert that they are eligible for continuing HRA benefits from the Local 198 Plan.
(Doc. 1 at p. 18). Defendants argue that this claim must be dismissed because the
plain language of the Plan documents indicates that Local 198 Trustees had the
authority to terminate Plaintiffs’ HRA benefits at any time for any reason. (Doc. 19-
1 at p. 7). In their opposition, Plaintiffs agree with this assertion and now seek to
amend their complaint to remove or otherwise dismiss claims arising under 29 U.S.C.
§ 1182(a)(1)(B). Given that both parties agree on this issue, Plaintiffs’ claims under
29 U.S.C, § 1182(a)(1)(B), as alleged in Count I of the complaint, are dismissed.
B. Claims Based on 29 U.S.C. § 1132(a)(2) (Count IT)
Defendants seek dismissal of Plaintiffs’ claim under § 1132(a}(2), which
provides that “[a] civil action may be brought by the Secretary, or by a participant,
beneficiary or fiduciary for appropriate relief under section 1109 of this title.” Section
1109 provides:

(a) Any person who is a fiduciary with respect to a plan who breaches
any of the responsibilities, obligations, or duties imposed upon
fiduciaries by this subchapter shall be personally liable to make good to
such plan any losses to the plan resulting from each such breach, and to
restore to such plan any profits of such fiduciary which have been made
through use of assets of the plan by the fiduciary, and shall be subject
to such other equitable or remedial relief as the court may deem
appropriate, including removal of such fiduciary. A fiduciary may also
be removed for a violation of section 1111 of this title.
(b) No fiduciary shall be liable with respect to a breach of fiduciary duty
under this subchapter if such breach was committed before he became a
fiduciary or after he ceased to be a fiduciary.
Plaintiffs allege that Defendants breached their fiduciary duties by retaming
money earned exclusively by former Local 106 members for workers who were Local
106 members prior to the merger of the two unions. (Doc. I at p. 18). Defendants
assert that this claim must be dismissed because § 1132(a)(2) only addresses breaches
of fiduciary duties that harm the Plan as a whole. (Doc. 19-1 at p. 17). Defendants
claim that not only are Plaintiffs’ claims not made on behalf of the Plan, but also, on
the contrary, that the claims intended to remove funds from the Plan and to deposit
them into individual member accounts, to the detriment of the Plan. (/d.).
Plaintiffs argue that Defendants stole assets from some participants of the
Plan and gave them to other participants of the same Plan, (Doc. 21 at pp. 27-28).
Plaintiffs further allege that this act alone harms the entire Plan because it
establishes that Defendants have disregarded their fiduciary duties to all
beneficiaries of the Plan by favoring some over others, and causing beneficiaries to be
concerned that other benefits may be targeted next. In hight of the low pleading
standard required to survive a motion to dismiss, the court finds that Plaintiffs have
pleaded a plausible claim that Defendants’ actions adversely affected the Plan.
Kr

C. Claims based on 29 U.S.C, § 1182(a)(38) (Counts ITI, IV, and V)
Plaintiffs also bring claims under 29 U.S.C. § 1182(a)(8), which allows a plan
beneficiary to bring an action under the theory of equitable estoppel. (Count [II). To
bring an equitable estoppel claim under 29 U.S.C. § 1132(a)(3), Plaintiffs must
establish that Local 198 Defendants breached their fiduciary duties by demonstrating
(1) a material misrepresentation; (2) reasonable and detrimental reliance upon the
representation; and (3) extraordinary circumstances. Mello v. Sara Lee Corp., 431
F.3d 440, 444-445 (5th Cir. 2005).
Plaintiffs also request the creation of a constructive trust (Count IV) and
equitable restitution (Count V).
1, Equitable Estoppel
a. Material Misrepresentation
First, Defendants argue that Plaintiffs have failed to allege that the Local 198
Defendants made any misrepresentations to Plaintiffs regarding the Plan. The Court
disagrees. As Plaintiffs point out, they have made several allegations that would
amount to misrepresentation. Plaintiffs allege that Neil Miller, Business manager for
Local 198, advised Local 106 Trustees that Local 198 intended to allow former Local
106 members to keep their HRAs after the merger of the Local 106 and Local 198
Funds. (Doc. 1 at J 13). Plaintiffs allege that the two funds negotiated an agreement
whereby half of Local 106’s $10 million would be transferred directly to Local 198
after the merger, but the remaining $5 million would be placed in the HRS accounts
of Local 106 members. (/d. at § 17). Plaintiffs allege that Local 106 representatives
were repeatedly assured by Local 198 representatives that they would be permitted

to keep their HRA accounts. Ud. at | 20). Plaintiffs also allege that despite this
assurance, Defendants negotiated a Plan agreement whereby the Board of Trustees
had absolute discretion to terminate the Local 106 HRA accounts. Ud. at § 22).
Finally, Plamntiffs allege that after Local 198 depleted the $5 million it received, it
terminated the former Local 106 employees’ HRA accounts and transferred the assets
to Local 198’s general welfare fund. Ud. at 26). Accordingly, the Court concludes
that Plaintiffs have sufficiently alleged a misrepresentation.
Moreover, Plaintiffs do not assert that Defendants’ oral representations should
modify the terms of the Plan. Rather, Plaintiffs assert that Defendants made a
material misrepresentation before the Plan was formed. Subsequently, the terms of
the new negotiated Plan did not reflect the actual terms to which the parties
previously agreed.
Finally, Defendants contend that Plaintiffs fail to allege that Defendants made
any kind of statements to Plaintiffs personally. Instead, Defendants argue, Plaintiffs
allege that Defendants made statements to the Local 106 Trustees, who are not
Plaintiffs in this action. Defendants have not cited, and the Court has not found, any
law indicating that Plaintiffs must allege that Defendants specifically made a
material misrepresentation to them personally to create a cause of action. Ostensibly,
the Local 106 Trustees represented Plaintiffs, the Plan beneficiaries, throughout
negotiations. Plaintiffs allege that the Local 106 trustees, in their capacity as
Plaintiffs’ representatives, agreed to move forward with merging the Local 106 and
198 Funds based on the material misrepresentations made by Defendants. Thus,

ry

Plaintiffs have pleaded facts sufficient to support the first prong of the equitable
estoppel test.
b. Reasonable Reliance
Second, Defendants argue that Plaintiffs have failed to allege that their reliance
on oral representations that contradict the unambiguous terms of the Plan was not
reasonable. Defendants assert that the United States Court of Appeals for the Fifth
Circuit has held that it is unreasonable to rely on a representation regarding the
terms of a plan where such a representation contradicts the unambiguous terms of
the plan. See Mello, 431 F.3d at 445-446 (holding that an employee did not reasonably
rely on oral representations and informai benefits statements which contradicted the
clear and unambiguous terms of an ERISA plan). Defendants further argue that
ERISA does not permit oral modification of unambiguous Plan terms.
Defendants also argue that amending a welfare benefit plan is not a fiduciary
function, and therefore cannot lead to a breach of fiduciary duties. (Doc. 19 at p. 16).
Defendants further argue that the Supreme Court has made clear that an entity does
not actin a fiduciary capacity when deciding to amend or terminate a welfare benefits
plan. Curtiss-Wright Corp. v. Schoonejongen, 514 U.S. 78, 78 (1995). Defendants’
decision to include the termination language in the new Plan alone is not sufficient
to state a claim for breach of a fiduciary duty, or a claim for equitable estoppel.
However, Plaintiffs claim that they reasonably relied on oral promises that were
ultimately broken by the termination language later added to the Plan. Thus,
Plaintiffs have pleaded facts sufficient to support the second prong of the equitable
estoppel test.
°

c. Extraordinary Circumstances
Simply failing to live up to written or oral assurances does not constitute the
requisite extraordinary circumstances. High v. E-Systems Inc., 459 F.3d 578, 580 (th
Cir. 2006) (holding that written and oral assurances that plaintiff would receive more
favorable benefit terms than he actually received did not constitute “extraordinary
circumstances.”). Plaintiffs here allege little more than this. Plaintiffs have not
directly addressed what, if any, factors make the circumstances surrounding this
matter “extraordinary.” In light of clear precedent defining “extraordinary” and
Plaintiffs’ lack of argument on this point, Plaintiffs have failed to plead facts
sufficient to support the third prong of the equitable estoppel test. Accordingly, Count
of Plaintiffs’ Complaint is dismissed.
2, Constructive Trusts (Count IV)
The purpose of a constructive trust “is to impose an equitable lien on property
because of a fiduciary relationship between the parties.” Schwegmann v.
Schwegmann, 441 So.2d 316, 323 (5th Cir. 1983). However, the Fifth Circuit has also
found that “it is clear that constructive trusts are not recognized under Louisiana
law.” Id. Therefore, Count IV of Plaintiffs’ claim for the creation of a constructive
trust is dismissed.

3. Equitable Restitution (Count V)
Plaintiffs request that the Court craft an equitable remedy in this matter and
order the creation of a constructive trust and an equitable hen on any overpaid

benefits in Defendants’ possession at the time this suit was filed. To secure an
equitable lien, a claimant must establish:
(1) that there exists an express or implied agreement between the
parties demonstrating a clear intent to create a security interest in order
to secure an obligation between them; (2) that the parties intended
specific property to secure the payment; (3) and that there is no
adequate remedy at law. In re RONFIN Series C Bonds Sec. Interest
Litig., 182 F.3d 366, 371 (5th Cir. 1999).
The Court finds that Plaintiffs have alleged sufficient facts to satisfy the first
element. Plaintiffs alleged that pursuant to certain oral assurances, they continued
to pay into the Plan with the understanding that their benefits from the Plan would
not be diminished. It was alleged that such promises were made to secure the
payment. However, over the course of this action, Plaintiffs have suggested other
potential remedies, including the assessment of punitive and exemplary damages.
Because other adequate remedies at law exist, Count V of Plaintiffs’ Complaint is
dismissed.
Finally, Defendants argue that Plaintiffs’ § 1132(a)(8) claim is duplicative of
their § 11382(a}(1)(B) claim and is therefore barred under precedent set forth by the
Fifth Circuit (Doc. 19-1 at p. 10), which holds that where a plaintiff can seek adequate
relief under 29 U.S.C. § 1132(a)(1)(B), the relief under § 1132(a)(3) is normally
unavailable. Swenson v. United of Omaha Life Insurance Company, 876 F.3d 809,
811-812 (5th Cir, 2017}. The Court finds this argument to be moot, as it has previously
concluded that Plaintiffs’ § 1132(a)(8) claim is dismissed.

an

D. Injunctive Relief (Count VD
Plaintiffs request injunctive relief in this matter pursuant to 29 U.S.C.
1132(a)(8), which allows Plan participants to enjoin any act or practice that violates
ERISA or the terms of the Plan. To be entitled to injunctive relief, Plaintiffs must
establish: (1) a substantial likelihood of prevailing on the merits; (2) a substantial
threat of irreparable injury if the injunction is not granted; (8) that the threatened
injury outweighs any harm that will result to the non-movant if the injunction is
granted; and (4) that the injunction will not disserve the public interest. See Ridgely
vu. Fed. Emergency Mgmt. Agency, 512 F.3d 727, 734 (th Cir. 2008). See also Allied
Mkig. Grp., Inc. v. CDL Mkig., Inc., 878 F.2d 806, 809 (5th Cir. 1989) (preliminary
injunctive relief “is an extraordinary remedy and should be granted only if the
movant has clearly carried the burden of persuasion with respect to all four factors.”)
Plaintiffs have not specifically alleged any of the requisite factors to support a
request for injunctive rehef. Therefore, Count VI of the complaint is dismissed
without prejudice.
E. State Law Claims (Counts Vila, Vi{b?, and VHT)
Defendants contend that Plaintiffs’ state law claims — rescission of the merger,
breach of contract, and exemplary and punitive damages, are preempted by ERISA.
(Doe. 19-1 at p. 18). A state-law cause of action is completely preempted if (1) the
benefit plan at issue constitutes an ERISA plan, and (2) the state law claims relate
to the plan. Woods vu. Texas Aggregates, L.L.C., 459 F.3d 600, 602 (5th Cir. 2006).

2 Plaintiffs appear to have two entries titled “Count VU;” the Court will designate the first as Vila and
the second as VITb.
14

I, State Law Fraud and Rescission Claims
Defendants seek to dismiss Plaintiffs’ claims for legal malpractice by fraud and
rescission of a contract due to vice of consent. However, the Complaint is clear that
these claims are only asserted against Defendants Louis Robein, Maria Cangemi, and
Robein, Urann, Spencer, Picard, & Cangemi, APLC. Accordingly, the Court finds it
unnecessary to address this argument and coneludes that Counts VIla (Legal
Malpractice by Fraud) and Count VIIb (Rescission of Contract Due to Vice of Consent)
are inapplicable to Defendant in this matter.®
2. State Law Breach of Contract Claims
Defendants also seek to dismiss Plaintiffs’ breach of contract claims. Plaintiffs
assert that Defendants breached their contract with Plaintiffs when Defendants
unilaterally included language in the Plan stating that the Board of Trustees had
unbridled discretion to terminate the HRA accounts and when they proceeded to
terminate said accounts. (Dec. 1 at p. 28). Plaintiffs assert that this constituted a
breach of contract because prior to the creation of the plan, Defendants issued
documentation indicating that the HRA accounts would not be terminated.
It is undisputed that the Plan at issue, which permits the Local 198 Board of
Trustees to terminate the HRA accounts, is an ERISA plan. Thus, the Court must
determine if the breach of contract claim relates to the Plan and is consequently
preempted by ERISA. See Aetna Health Inc. v. Davila, 542 U.S. 200, 208-09 (2004)
(holding that the goal of ERISA is to create a uniform regulatory regime over

3 Counts VI and Vila are addressed in the Cowrt’s Ruling and Order at Doc. 18.
ae

employee benefit plans, and that ERISA preempts any state law cause of action that
duplicates, supplements, or supplants the remedies available under ERISA). The
Fifth Circuit has instructed that a state law claim relates to a plan if (1) the state law
claim addresses areas of exclusive federal concern, such as the right to receive
benefits under the terms of an ERISA plan and (2) the claim directly affects the
relationship among the traditional ERISA entities, including 1) the employer, the
plan, and its fiduciaries, and ii) the participants and beneficiaries. Woods, 459 F.3d
at 602. An analysis of these factors indicates that Plaintiffs’ breach of contract claim
is preempted. Plaintiffs’ claim directly involves their right to receive benefits under
the ERISA Plan. Although Plaintiffs claim that Defendants inserted the discretionary
language without their permission, ultimately, the claim still involves benefits to
which they are entitled under the Plan. Accordingly, Count VII of Plaintiffs’
Complaint is dismissed.
IV. CONCLUSION
Accordingly,
IT IS ORDERED that the Motion to Dismiss (Doc. 18) is GRANTED IN
PART and DENIED IN PART,
IT IS FURTHER ORDERED that Counts I, II, IV, V, VIla, VITb and VIII of
the Complaint are DISMISSED. Count VI is DISMISSED WITHOUT
PREJUDICE.

IT IS FURTHER ORDERED that Counts II, IX, and X remain viable.
Baton Rouge, Louisiana, this sy of September, 2019.
K\4
ne Q
JUDGE BRIAN A JACK SON
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10191118. Public record. Not legal advice.