MEMORANDUM AND ORDER
P. KEVIN CASTEL, District Judge.
Plaintiffs Mason Tenders District Council of Greater New York ("The Union"), Mason Tenders District Council Welfare Fund, Pension Fund, Annuity Fund, Training Fund, Health and Safety Fund ("the Funds"), and Dominick Giammona, as Funds' Contributions/Deficiency Manager, brought claims against defendants Exterior Wall and Building Consultants, Inc. ("Exterior Wall"), Construction and Realty Services Group Inc., Construction Realty Safety Group Inc., Domani Consulting, Inc., and Domani Inspection Services, Inc., under the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1132(a)(3) and 1145, and § 301 of the Labor Management Relations Act of 1947 (the "LMRA"), 29 U.S.C. § 185. Defendants filed a counterclaim against plaintiffs to recover payments allegedly mistakenly made by Exterior Wall, an employer, to the Funds. Plaintiffs moved to dismiss this counterclaim. For reasons to be explained, the motion is granted.
Plaintiffs' complaint alleges that defendants violated one or more collective bargaining agreements, the trust agreements of the Funds, the LMRA, and ERISA. (Compl. at ¶ 2.) Specifically, the complaint alleges that during the audit period of April 1, 2011 through September 30, 2014, for twenty-two employees of defendants working as Site Safety Mangers and Fire Safety Managers within the jurisdiction of the agreements, rather than contribute to the Funds for all hours worked by these employees, defendants only reported and contributed for sufficient hours to induce the Funds to provide benefits to these employees. (
Defendants' counterclaim alleges that these Site Safety Mangers and Fire Safety Managers (the "Managers") were not performing work covered by the collective bargaining agreement, and that the contributions that defendants made to the Funds were made in error. (Def.'s Counterclaim at ¶ 13.) Defendants seek the return of these funds.
Defendants further allege that a prior dispute over fringe benefit contributions, dues checkoffs, and PAC contributions between the parties with respect to the Managers arose after the Funds conducted an October 2011 audit of Exterior Wall's books and records for the period July 1, 2006, through March 29, 2011 (the "October 2011 Audit"). (
Defendants allege that any amount for which they are liable to the Funds for deficient contributions must be indemnified by the Union, because the Union fraudulently misled them regarding the contributions due under the contract. (
Rule 12(b)(6) requires a pleading, on this motion a counterclaim, to "contain sufficient factual matter, accepted as true, to `state a claim to relief that is plausible on its face.'"
Return of the Alleged Overpayments.
While the counterclaim seeks return of payments defendants made to the Funds under Section 302 of the LMRA, such relief is not available under that statute.
Under Section 403(c) of ERISA, "the assets of a plan shall never inure to the benefit of any employer," except under specific, enumerated circumstances. 29 U.S.C. § 1103(c). One of these exceptions permits plan administrators to return contributions to the employer "within 6 months after the plan administrator determines that the contribution was made" by "a mistake of fact or law." 29 U.S.C. § 1103(c)(2)(A)(ii). Second Circuit precedent emphasizes the "permissive" nature of this statutory language.
Because "ERISA does not require a fund to refund overpayments," but rather permits a fund "to do so in accordance with its own policy,"
A district court's review of a fund's administrative decisions regarding the refund of overpayments is "limited," as "Congress evidently believed that the risk of mistaken contributions should rest largely with the employer."
The Second Circuit has held that the same standard applies in cases where an employer alleges overpayment to a fund only after the fund itself brings a lawsuit against the employer for alleged underpayment.
This barrier is not merely a function of judicial efficiency or administrative convenience. Under the law of the Circuit, this Court is limited to a review of a fund's decision to not reimburse an employer for overpayment. No request by the employer has been alleged, and thus the Funds could not have acted in an arbitrary and capricious manner in denying the request. Plaintiffs' motion to dismiss defendants' counterclaim seeking the return of alleged overpayments to the funds is granted.
Defendants also brings counterclaims against the Union to indemnify defendants' potential liability to the Funds, and against the Funds to indemnify defendants' potential liability to the Union. The counterclaim does not state the legal basis for these claims. Defendants raise several legal theories in their opposition to plaintiffs' motion to dismiss.
Defendants argue that an implied cause of action for indemnity exists under ERISA, though they cite no precedent supporting this position. (Def.'s Mem. in Opp., February 28, 2017, Dkt. 69 at 14.) Next, defendants appear to argue that the Court may require indemnification through its equitable powers, citing New York state court decisions. However, other than stating basic principles of indemnity, restitution, and unjust enrichment, defendants do not provide any precedent supporting this contention or explain how the Court could use its equitable powers to order indemnification. (
The counterclaim fails to state a claim for fraud under New York law, which requires a plaintiff to assert "a representation or a material omission of fact which was false and known to be false by defendant, made for the purpose of inducing the other party to rely upon it, justifiable reliance of the other party on the misrepresentation or material omission and injury."
Defendants allege that it was their "understanding" that the Managers could "maintain their benefits despite the fact that they were not performing work covered by any collective bargaining agreement" so long as defendants made contributions to the Funds for this purpose that were not "contractually due." (Def.'s Counterclaim at ¶¶ 6, 9.) However, as a result of the October 2011 audit, the Funds alleged that Exterior Wall failed to make contractually due fringe benefit contributions, dues checkoffs, and PAC contributions for the Managers. (
Presumably, the alleged false statement on which defendants base their claim for fraud is that someone told defendants that they were contractually permitted to make payments to the Funds, in less than the full amount that would need be paid if the Managers were engaged in covered work, but in an amount sufficient to maintain the Managers' coverage. However, beyond stating that defendants had an "understanding" and that something was said by someone during settlement negotiations in 2011, what was said, and by whom, is not clear from the counterclaim. For what purpose such statements were made, and whether defendants were justified in relying on any such statements, is even less clear. Because defendants have failed to allege the elements of fraud, let alone allege them with particularity as required by Rule 9(b), Fed. R. Civ. P., defendants' claims for indemnification, insofar as they can be construed as claims for fraud, must be dismissed.
None of defendants' other theories provide a legal basis for the Court to grant the requested indemnification.
Defendants' counterclaim having failed to state a claim upon which relief could be granted, plaintiffs' motion to dismiss (Dkt. 60) is GRANTED. The Clerk of the Court is directed to terminate the motion.