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Arendt v. Washington-Idaho-Montana Carpenters-Employers Retirement Trust Fund

United States District Court, E.D. Washington

May 2, 2014

GERALD C. ARENDT and DAVID D. BROWN, Plaintiffs,
v.
WASHINGTON-IDAHO-MONTANA CARPENTERS-EMPLOYERS RETIREMENT TRUST FUND and ZENITH ADMINISTRATORS, INC., Defendants, and UNITED STATES OF AMERICA, Intervenor-Defendants.

ORDER GRANTING MOTION TO DISMISS (ECF No. 45)

LONNY R. SUKO, Senior District Judge.

BEFORE THE COURT is the Defendants' Motion To Dismiss (ECF No. 45), filed January 28, 2014. A telephonic hearing was held April 10, 2014. Jeffry K. Finer and Gery R. Gasick participated on behalf of the Plaintiffs; Robin L. Haynes and William M. Symmes participated on behalf of Defendants; and Kenneth E. Sealls participated on behalf of the Intervenor United States. Defendants Washington-Idaho-Montana Carpenters-Employers Retirement Trust Fund (hereafter "Fund") and Zenith American Solutions, Inc., (f/k/a Zenith Administrators, Inc.) ("Zenith") (collectively "Defendants"), jointly move for dismissal of Plaintiffs' First Amended Complaint for Declaratory Judgment and Injunctive Relief (ECF No. 28) ("Amended Complaint") pursuant to Fed.R.Civ.P. 12(b)(6). At the conclusion of oral argument on April 10, 2014, the Court took the matter under advisement. Upon consideration of the written memoranda, the arguments of counsel, and the record, the Court grants Defendants' motion as provided herein.

I. PROCEDURAL/FACTUAL BACKGROUND

On September 13, 2011, Plaintiffs filed a complaint against the Secretary of Labor alleging that the elimination of the subsidized early retirement option of their retirement plan violated the Due Process Clause of the Fifth Amendment and that the distinction between early retirees already in "pay status" and those not yet retired amounts to a violation of the equal protection component of the Due Process Clause. The background facts that pertain to Plaintiffs' original Complaint are recited in the Order Granting Motion to Dismiss entered on March 9, 2014. (ECF No. 16) and will not be repeated here.

On March 9, 2012, judgment was entered by this Court in favor of the Secretary of Labor. (ECF No. 18). Plaintiffs appealed that judgment to the Ninth Circuit Court of Appeals. (ECF No. 23). On September 3, 2013, the Ninth Circuit vacated the trial court judgment and instructed the Court to dismiss the case without prejudice. The Ninth Circuit ruled that Plaintiff Arendt lacked standing to bring a claim that the elimination of his early retirement benefits violated the due process and equal protection clauses. (ECF No. 24 at 3). Because the Circuit found it was without jurisdiction to rule, the question of the PPA's[1] constitutionality was not decided. (ECF No. 24 at 4). On October 17, 2013, Plaintiffs filed their First Amended Complaint, substituting the Retirement Fund Trustees ("the Fund") and the Plan Administrator ("Zenith") as defendants in place of the Secretary of Labor. (ECF No. 28). Plaintiffs' claims under the First Amended Complaint include: (1) a retroactive taking in violation of the Fifth Amendment; and (2) gross discrimination among certain Fund participants in violation of the equal protection clause of the Fifth Amendment.

According to their First Amended Complaint, Plaintiffs participate in a collectively bargained multiemployer plan that offered an early retirement pension benefit known as the "Rule of 80 Early Retirement" pension ("the Plan") that allowed participants to retire before age 65 without reducing their basic retirement benefit. In order to be eligible for the "Rule of 80, " participants had to reach a total of 80 when adding (i) their age, and (ii) the number of years in which they participated in the plan and contributed 400 or more working hours. Summary Plan Description and Retirement Plan, as amended January 1, 2001 ("2001 Plan"), ECF No. 11-2 at 12. In August of 2009, the Plan notified Plaintiffs and other Plan participants that due to recent severe investment losses and the decline in the stock market, the Plan was underfunded and in "critical status." ECF No. 16 at 2. Because of the financial insecurity of the Plan-then less than 65 percent funded and projected to be underfunded for the Plan year beginning July 1, 2013-it was required to take measures in order to continue funding normal benefits to present and future retirees. Id. Acting pursuant to the PPA, the Plan's Board of Trustees decided to eliminate the Plan's adjustable benefits, including subsidized early retirement. Id.

II. DISCUSSION

A. Fed.R.Civ.P. 12(b)(6) Standard

A Rule 12(b)(6) dismissal is proper only where there is either a "lack of a cognizable legal theory" or "the absence of sufficient facts alleged under a cognizable legal theory." Balistreri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir. 1990). In reviewing a 12(b)(6) motion, the court must accept as true all material allegations in the complaint, as well as reasonable inferences to be drawn from such allegations. Mendocino Environmental Center v. Mendocino County, 14 F.3d 457, 460 (9th Cir. 1994); NL Indus., Inc. v. Kaplan, 792 F.2d 896, 898 (9th Cir. 1986). The complaint must be construed in the light most favorable to the plaintiff. Parks School of Business, Inc. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995). The sole issue raised by a 12(b)(6) motion is whether the facts pleaded, if established, would support a claim for relief; therefore, no matter how improbable those facts alleged are, they must be accepted as true for purposes of the motion. Neitzke v. Williams, 490 U.S. 319, 326-27, 109 S.Ct. 1827 (1989). The court need not, however, accept as true conclusory allegations or legal characterizations, nor need it accept unreasonable inferences or unwarranted deductions of fact. In re Stac Electronics Securities Litigation, 89 F.3d 1399, 1403 (9th Cir. 1996).

As it is not necessary for the court to review materials outside of the pleadings in order to make its determination in this matter, Defendants' motion is not converted to a summary judgment motion under Fed.R.Civ.P. 56 and reliance on the 12(b)(6) standard is appropriate.

B. Defendants' and Intervenor's Arguments

1. The Fund and Zenith are not government or state actors.

Defendants and Intervenor (collectively "Defendants") argue that Plaintiffs' claims for violations of the 5th Amendment of the U.S. Constitution must be dismissed because the Fund and Zenith are private entities, not government or state actors. Citing Lugar v. Edmondson Oil Co., Inc., 457 U.S. 922, 936-937 (1982), Defendants conclude that because state action is required for Plaintiffs' Equal Protection and takings claims, Sutton [2] should apply to and preclude the bringing of their constitutional claims.

In accordance with the PPA, the Plan sponsor (the Plan's Board of Trustees) agreed that one of the ways they would rehabilitate the Plan was by eliminating all of the adjustable benefits offered by the Plan, including subsidized early retirement.[3] The Plan did not reduce accrued benefits payable at normal retirement age and did not cut any benefits of participants who retired and entered "pay status" (as defined in ERISA § 305(I)(6), 29 U.S.C. § 1085(I)(6)) before they were notified that the Plan was in critical status. Defendants conclude that there is no state action sufficient to support a constitutional argument in this matter, especially when coupled with this Court's previous finding that Plaintiffs' ...


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