Pension Benefit Guaranty Corporation v. Idaho Hyperbarics, Inc.

MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM Andrea J Rosholt appearing for Defendant Idaho Hyperbarics, Inc.. Responses due

D. IdahoSeptember 8, 2016

MOTION TO DISMISS BY IDAHO HYPERBARICS, INC. - 1 Client:4225921.1 Charles Edward Cather III, ISB No. 6297 Andrea J. Rosholt, ISB No. 8895 MOFFATT, THOMAS, BARRETT, ROCK & FIELDS, CHARTERED 900 Pier View Drive Suite 206 Post Office Box 51505 Idaho Falls, Idaho 83405 Telephone (208) 522-6700 Facsimile (208) 522-5111 cec@moffatt.com ajr@moffatt.com 26676.0000 Attorneys for Defendant Idaho Hyperbarics, Inc. UNITED STATES DISTRICT COURT FOR THE DISTRICT OF IDAHO PENSION BENEFIT GUARANTY CORPORATION, Plaintiff, vs. IDAHO HYPERBARICS, INC., as Plan Administrator of the Idaho Hyperbarics, Inc. Defined Benefit Plan, Defendant. Case No. 4:16-cv-00325-BLW MOTION TO DISMISS BY IDAHO HYPERBARICS, INC. COMES NOW Idaho Hyperbarics, Inc., by and through its attorneys of record and hereby moves to dismiss the Amended Complaint of Plaintiff Pension Benefit Guaranty Corporation (Dkt. 01) on the basis that the PBGC’s claims against Idaho Hyperbarics are barred by the statute of limitations. This motion is brought pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure and 29 U.S.C. § 1303(e)(6). Case 4:16-cv-00325-BLW Document 13 Filed 09/08/16 Page 1 of 3 MOTION TO DISMISS BY IDAHO HYPERBARICS, INC. - 2 Client:4225921.1 DATED this 8th day of September, 2016. MOFFATT, THOMAS, BARRETT, ROCK & FIELDS, CHARTERED By /s/ Andrea J. Rosholt Andrea J. Rosholt - Of the Firm Attorneys for Defendant Idaho Hyperbarics, Inc. Case 4:16-cv-00325-BLW Document 13 Filed 09/08/16 Page 2 of 3 MOTION TO DISMISS BY IDAHO HYPERBARICS, INC. - 3 Client:4225921.1 CERTIFICATE OF SERVICE I HEREBY CERTIFY that on the 8th day of September, 2016, I filed the foregoing MOTION TO DISMISS electronically through the CM/ECF system, which caused the following parties or counsel to be served by electronic means, as more fully reflected on the Notice of Electronic Filing: Erin C. Kim kim.erin@pbgc.gov efile@pbgc.gov /s/ Andrea J. Rosholt Andrea J. Rosholt Case 4:16-cv-00325-BLW Document 13 Filed 09/08/16 Page 3 of 3 MEMORANDUM IN SUPPORT OF MOTION TO DISMISS AMENDED COMPLAINT BY IDAHO HYPERBARICS, INC. - 1 Client:4240441.1 Charles Edward Cather III, ISB No. 6297 Andrea J. Rosholt, ISB No. 8895 MOFFATT, THOMAS, BARRETT, ROCK & FIELDS, CHARTERED 900 Pier View Drive Suite 206 Post Office Box 51505 Idaho Falls, Idaho 83405 Telephone (208) 522-6700 Facsimile (208) 522-5111 cec@moffatt.com ajr@moffatt.com Attorneys for Defendant Idaho Hyperbarics, Inc. UNITED STATES DISTRICT COURT FOR THE DISTRICT OF IDAHO PENSION BENEFIT GUARANTY CORPORATION, Plaintiff, vs. IDAHO HYPERBARICS, INC., as Plan Administrator of the Idaho Hyperbarics, Inc. Defined Benefit Plan, Defendant. Case No. 4:16-cv-00325-BLW MEMORANDUM IN SUPPORT OF MOTION TO DISMISS AMENDED COMPLAINT BY IDAHO HYPERBARICS, INC. I. INTRODUCTION Defendant Idaho Hyperbarics, Inc. submits this memorandum in support of its motion for dismissal of the Amended Complaint of Plaintiff Pension Benefit Guaranty Corporation (“PBGC”) (Dkt. 09) on the basis that PBGC's claims against Idaho Hyperbarics are barred by the statute of limitations. 29 U.S.C. § 1303(e)(6). Case 4:16-cv-00325-BLW Document 13-1 Filed 09/08/16 Page 1 of 7 MEMORANDUM IN SUPPORT OF MOTION TO DISMISS AMENDED COMPLAINT BY IDAHO HYPERBARICS, INC. - 2 Client:4240441.1 II. STANDARD OF REVIEW “A motion to dismiss made pursuant to Federal Rule of Civil Procedure 12(b)(6) tests the sufficiency of a party’s claim for relief. When considering such a motion, the Court’s inquiry is whether the allegations in a pleading are sufficient under applicable pleading standards. Federal Rule of Civil Procedure 8(a) sets forth minimum pleading rules, requiring only a ‘short and plain statement of the claim showing that the pleader is entitled to relief.’” FED. R. CIV. P. 8(a)(2). Panuski v. Idaho, No. 1:15-CV-00600-EJL, 2016 WL 3581997, at *1 (D. Idaho June 28, 2016). Dismissal may be appropriate when the plaintiff has included sufficient allegations disclosing some absolute defense or bar to recovery. Mallard v. Battelle Energy All., LLC, No. 4:12-CV-00587-BLW, 2013 WL 5876360, at *3 (D. Idaho Oct. 31, 2013), citing Weisbuch v. Cnty. of L.A., 119 F.3d 778, 783, n.1 (9th Cir. 1997) (stating that “[i]f the pleadings establish facts compelling a decision one way, that is as good as if depositions and other . . . evidence on summary judgment establishes the identical facts”). Although a court may not consider any evidence outside the pleadings in ruling on a 12(b)(6) motion, “[a] court may, however, consider certain materials-documents attached to the complaint, documents incorporated by reference in the complaint, or matters of judicial notice-without converting the motion to dismiss into a motion for summary judgment.” Wilson v. Amneal Pharm., L.L.C., No. 1:13-CV-00333-CWD, 2013 WL 6909930, at *4 (D. Idaho Dec. 31, 2013) (internal citations omitted). III. ARGUMENT The PBGC is a wholly-owned United States government corporation established pursuant to 29 U.S.C. § 1302. Amended Complaint (Dkt. 09), ¶ 6. PBGC is the agency that administers and enforces the nation’s defined benefit pension plan termination insurance Case 4:16-cv-00325-BLW Document 13-1 Filed 09/08/16 Page 2 of 7 MEMORANDUM IN SUPPORT OF MOTION TO DISMISS AMENDED COMPLAINT BY IDAHO HYPERBARICS, INC. - 3 Client:4240441.1 program under Title IV of the Employee Retirement Income Security Act of 1975 (“ERISA”). See 29 U.S.C. § 1301-1461. In this case, the PBGC brought the above-referenced action under Section 1303(e)(1) following Idaho Hyperbarics, Inc.’s standard termination of its single- employer, defined pension plan. See Amended Complaint, ¶¶ 2, 21, 24. According to the Amended Complaint, “Idaho Hyperbarics violated Title IV of ERISA and applicable regulations, by failing to distribute Plan assets in full satisfaction of the Plan’s benefit liabilities.” Id., ¶ 54; 29 U.S.C. § 1341. Section 1303(e) is the statutory provision that provides the PBGC the right to bring civil actions. Notably, that same subsection also specifies the PBGC’s limitation to bring civil actions. See § 1303(e)(6). That subsection provides in pertinent part: (A) Except as provided in subparagraph (C), an action under this subsection may not be brought after the later of- (i) 6 years after the date on which the cause of action arose, or (ii) 3 years after the applicable date specified in subparagraph (B). (B) (i) Except as provided in clause (ii), the applicable date specified in this subparagraph is the earliest date on which the corporation acquired or should have acquired actual knowledge of the existence of such cause of action. (ii) If the corporation brings the action as a trustee, the applicable date specified in this subparagraph is the date on which the corporation became a trustee with respect to the plan if such date is later than the date described in clause (i). Id. Case 4:16-cv-00325-BLW Document 13-1 Filed 09/08/16 Page 3 of 7 MEMORANDUM IN SUPPORT OF MOTION TO DISMISS AMENDED COMPLAINT BY IDAHO HYPERBARICS, INC. - 4 Client:4240441.1 A cause of action arises for purposes of Section 1303(e)(6) “when a violation of PBGC regulations occurred.” Pension Ben. Guar. Corp. v. Ferfolia Funeral Homes Inc., 835 F. Supp. 2d 416, 419 (N.D. Ohio 2011). In Ferfolia, the PBGC brought an action against the administrator and contributing sponsor of the defined-benefit pension plan alleging that the final distributions from the plan were not made in accordance with ERISA and PBGC regulations. The defendant moved to dismiss the Complaint as untimely, arguing that the statute of limitations started running when the defendant terminated the plan. Id., 835 F. Supp. 2d at 420, citing Pension Benefit Guar. Corp. v. Don’s Trucking Co., Inc., 308 F. Supp. 2d 680, 682 (E.D. Va. 2003) (holding that PBGC’s cause of action in a distress termination arises when employer liability is established on the termination date); PBGC v. Alloytek, Inc., 924 F.2d 620, 626 (6th Cir. 1991) (holding that employer liability springs from plan termination when there are insufficient assets to pay guaranteed benefits as of the plan termination date); see also Pension Ben. Guar. Corp. v. Uforma/Shelby Bus. Forms, Inc., No. 1:13-CV-266, 2014 WL 221941, at *5 (S.D. Ohio Jan. 21, 2014), report and recommendation adopted, No. 1:13CV266, 2014 WL 585371 (S.D. Ohio Feb. 14, 2014) (cause of action arises for purposes of section 1303(e)(6) when underlying pension plan is terminated). The PBGC argued that “the cause of action arose when a violation of the PBGC regulations occurred.” In that case, the “PBGC argue[d] that the cause of action accrued when Ferfolia made distributions that were deficient and inconsistent with the information that Ferfolia provided to PBGC on the Form 500.” Id. The court agreed with the PBGC holding that “the statute of limitations is not triggered until some violation of ERISA or PBGC regulations occurs-such as the unlawful distribution of deficient payments to plan participants.” Case 4:16-cv-00325-BLW Document 13-1 Filed 09/08/16 Page 4 of 7 MEMORANDUM IN SUPPORT OF MOTION TO DISMISS AMENDED COMPLAINT BY IDAHO HYPERBARICS, INC. - 5 Client:4240441.1 Here, according to the PBGC’s own interpretation of Section 1303(e)(6), its Amended Complaint against Idaho Hyperbarics is untimely and therefore subject to dismissal. The PBGC contends that Idaho Hyperbarics first violated Title IV of ERISA when it distributed plan assets to participants before filing the Form 500 with the PBGC. Amended Complaint, ¶ 25; see also id., ¶ 13 providing in pertinent part: In a standard termination, before distributing any plan assets, the plan administrator must send PBGC a “Standard Termination Notice - PBGC Form 500” (“Form 500”) with information about plan assets and benefit liabilities. See 29 U.S.C. § 1341(b)(2)(A); 29 C.F.R. § 4041.25. PBGC then has 60 days to determine whether there is any reason to believe that the plan is not sufficient for benefit liabilities. See 29 U.S.C. § 1341(b)(2)(C); 29 C.F.R. § 4041.26. Absent a finding from PBGC that the plan is not sufficient for benefit liabilities, the plan administrator must distribute plan assets in accordance with Title IV of ERISA within a specified time period. See 29 U.S.C. §§ 1341(b)(2)(D), 1341(b)(3); 29 C.F.R. § 4041.28. According to the Amended Complaint, Idaho Hyperbarics filed the Form 500 on May 27, 2009. Id., ¶ 24. In a subsequent filing with the PBGC on March 19, 2009, “Hyperbarics stated that it had paid a total of $575,900 to the Plan participants on March 19, 2009, more than 2 months before Idaho Hyperbarics filed the Form 500.” Id., ¶ 26. Thereafter, on “April 28, 2011, PBGC notified Idaho Hyperbarics that the Plan’s standard termination had been selected for audit because, in violation of Title IV or [sic] ERISA, the Plan assets were distributed to participants before filing the Form 500.” Id.,¶ 27 (emphasis added). As a result of the audit, the PBGC issued a determination (and ultimately final determination) that “Idaho Hyperbarics violated Title IV of ERISA and applicable regulations, by failing to distribute Plan assets in full satisfaction of the Plan’s benefit liabilities.” Id., ¶ 54; 29 U.S.C. § 1341. The Case 4:16-cv-00325-BLW Document 13-1 Filed 09/08/16 Page 5 of 7 MEMORANDUM IN SUPPORT OF MOTION TO DISMISS AMENDED COMPLAINT BY IDAHO HYPERBARICS, INC. - 6 Client:4240441.1 failure to distribute plan assets in accord with ERISA occurred, according to the Complaint, on March 19, 2009. Amended Complaint, ¶ 26. Under either limitation period, the PBGC’s action is untimely, entitling Idaho Hyperbarics to dismissal of the Amended Complaint. By PBGC’s own admission, it was on notice by at the very least April 28, 2011, that a violation of ERISA occurred with regard to Idaho Hyperbarics’ standard termination. Under the limitation period[s], the PBGC was entitled to bring a cause of action until: March 19, 2016 (six years after Idaho Hyperbarics first allegedly breached ERISA with regard to the standard termination) or April 28, 2014 (three years after the PBGC officially alleged a violation of ERISA and selected Idaho Hyperbarics for an audit on that basis). This is especially true, where the PBGC has taken the position that the limitation in Section 1303(e)(6) begins to run “when a violation of PBGC regulations occur[s].” PBGC v. Ferfolia Funeral Homes Inc., 835 F. Supp. 2d 416, 419 (N.D. Ohio 2011). IV. CONCLUSION For the foregoing reasons, Idaho Hyperbarics respectfully requests that this Court enter an order granting Idaho Hyperbarics’ motion and dismissing the Amended Complaint. DATED this 8th day of September, 2016. MOFFATT, THOMAS, BARRETT, ROCK & FIELDS, CHARTERED By /s/ Andrea J. Rosholt Andrea J. Rosholt - Of the Firm Attorneys for Defendant Idaho Hyperbarics, Inc. Case 4:16-cv-00325-BLW Document 13-1 Filed 09/08/16 Page 6 of 7 MEMORANDUM IN SUPPORT OF MOTION TO DISMISS AMENDED COMPLAINT BY IDAHO HYPERBARICS, INC. - 7 Client:4240441.1 CERTIFICATE OF SERVICE I HEREBY CERTIFY that on the 8th day of September , I filed the foregoing MEMORANDUM IN SUPPORT OF MOTION TO DISMISS AMENDED COMPLAINT BY IDAHO HYPERBARICS, INC. electronically through the CM/ECF system, which caused the following parties or counsel to be served by electronic means, as more fully reflected on the Notice of Electronic Filing: Erin C. Kim kim.erin@pbgc.gov efile@pbgc.gov /s/ Andrea J. Rosholt Andrea J. Rosholt Case 4:16-cv-00325-BLW Document 13-1 Filed 09/08/16 Page 7 of 7