296 F.3d 164 | 3rd Cir. | 2002
Before: McKEE and FUENTES, Circuit Judges, and(cid:13) POGUE, Judge, United States Court of International Trade*(cid:13) (Opinion Filed: July 17, 2002)(cid:13) Kenneth I. Nowak (Argued)(cid:13) Zazzali, Fagella, Nowak, Kleinbaum(cid:13) & Friedman(cid:13) Newark, NJ 07102-5410(cid:13) Attorney for Appellant(cid:13) Roger D. Netzer (Argued)(cid:13) Willkie, Farr & Gallagher(cid:13) New York, NY 10019-6099(cid:13) Susan Stryker(cid:13) Sterns & Weinroth(cid:13) Trenton, NJ 08607(cid:13) Attorneys for Appellees -(cid:13) Foodtown, Inc., et al.(cid:13) Anthony X. Arturi, Jr. (Argued)(cid:13) Alampi, Arturi, D’Argenio, &(cid:13) Guaglardi, LLP(cid:13) Englewood Cliffs, NJ 007632(cid:13) Attorney for Appellee -(cid:13) Martin Vitale(cid:13) _________________________________________________________________(cid:13) * Honorable Donald C. Pogue, United States Court of International Trade,(cid:13) sitting by designation.(cid:13) 2(cid:13) James M. Strauss(cid:13) Christopher M. Houlihan(cid:13) Putney, Twombly, Hall &(cid:13) Hirson, LLP(cid:13) New York, NY 10175(cid:13) Attorney for Appellees -(cid:13) Nicholas D’Agostino and(cid:13) D’Agostino Supermarkets, Inc.(cid:13) OPINION OF THE COURT(cid:13) POGUE, Judge, Court of International Trade:(cid:13) Obligated by two collective bargaining agreements with(cid:13) Teamsters Local 863 (the "Local"), Twin County Grocers,(cid:13) Inc. ("Twin"), a wholesale distributor of supermarket and(cid:13) related products which had become insolvent, incurred(cid:13) withdrawal liability in the amount of $9.3 million to the(cid:13) Local’s multiemployer pension fund. The Board of Trustees(cid:13) of the pension fund ("Appellant") sought judgment against(cid:13) several corporate and individual defendants ("Appellees").1(cid:13) The Appellant alleges that the Appellees were Twin’s alter(cid:13) ego, that Twin’s corporate veil should be pierced to assess(cid:13) liability on the Appellees, and that the Appellees breached(cid:13) fiduciary duties and aided and abetted the breach of(cid:13) fiduciary duties owed to the Appellant. The district court(cid:13) dismissed the action for lack of standing, based on its(cid:13) conclusion that the bankruptcy trustee was the only(cid:13) suitable party to pursue such a proceeding. The Board of(cid:13) Trustees of the pension fund appeals. We reverse as to the(cid:13) first three counts.(cid:13) We have jurisdiction to hear this appeal pursuant to 28(cid:13) U.S.C. S 1291 and 28 U.S.C. S 158(d). O’Dowd v. Trueger,(cid:13) 233 F.3d 197, 201 (3d Cir. 2000).(cid:13) _________________________________________________________________(cid:13) 1. Appellees include the Foodtown Appellees, consisting of Foodtown(cid:13) members, Foodtown directors, and Foodtown, Inc.; Nicholas D’Agostino(cid:13) and D’Agostino Supermarkets, Inc.; and Martin Vitale.(cid:13) 3(cid:13) I.(cid:13) We exercise plenary review over the district court’s(cid:13) granting of a Fed. R. Civ. P. 12(b)(6) motion to dismiss for(cid:13) lack of standing and failure to state a claim. Jordan v. Fox,(cid:13) Rothschild, O’Brien & Frankel, 20 F.3d 1250, 1261 (3d Cir.(cid:13) 1994). In reviewing the district court’s decision to grant(cid:13) such a motion, we accept as true all allegations in the(cid:13) complaint, giving the Plaintiff the benefit of every favorable(cid:13) inference that can be drawn from the allegations. Id.; U.S.(cid:13) Express Lines, LTD. v. Higgins, 281 F.3d 383, 388 (3d Cir.(cid:13) 2002). A complaint should not be dismissed for failure to(cid:13) state a claim "unless it appears beyond doubt that the(cid:13) plaintiff can prove no set of facts in support of his claim(cid:13) which would entitle him to relief." Conley v. Gibson, 355(cid:13) U.S. 41, 45-46 (1957).(cid:13) II.(cid:13) Appellant’s claim is based on withdrawal liability(cid:13) established by the Employee Retirement Income Security(cid:13) Act of 1974 ("ERISA"), 29 U.S.C. S 1001, et seq., as(cid:13) amended by the Multiemployer Pension Plan Amendments(cid:13) Act of 1980 ("MPPAA"), 29 U.S.C. SS 1381-1461.2(cid:13) ERISA was enacted by Congress to protect employees’(cid:13) pension rights. Milwaukee Brewery Workers’ Pension Plan(cid:13) v. Jos. Schlitz Brewing Co., 513 U.S. 414, 416 (1995).(cid:13) Congress found, however, that ERISA "did not adequately(cid:13) protect plans from the adverse consequences that resulted(cid:13) when individual employers terminate[d] their participation(cid:13) in, or withdr[e]w from, multiemployer plans." Pension(cid:13) Benefit Guaranty Corp. v. R.A. Gray & Co., 467 U.S. 717,(cid:13) 722 (1984). As a result, several years after the enactment of(cid:13) ERISA, Congress promulgated the MPPAA to foster the(cid:13) growth and continuance of multiemployer pension plans.(cid:13) See Bay Area Laundry & Dry Cleaning Pension Trust Fund(cid:13) v. Ferbar Corp., 522 U.S. 192, 196 (1997). The MPPAA’s(cid:13) primary objective is to insulate these plans in order to(cid:13) protect the retirement benefits of covered employees. In(cid:13) _________________________________________________________________(cid:13) 2. There is no claim here involving the assumption or rejection of the(cid:13) collective bargaining agreement pursuant to 11 U.S.C. S 1113.(cid:13) 4(cid:13) order to satisfy this goal, the MPPAA requires employers(cid:13) who withdraw from underfunded multiemployer pension(cid:13) plans to pay a "withdrawal liability." See, e.g., ILGWU Nat’l(cid:13) Retirement Fund v. Minotola Indus., Inc., 1991 U.S. Dist.(cid:13) LEXIS 6147 (S.D.N.Y. 1991)(Withdrawal liability is imposed(cid:13) in order "to ensure that workers’ retirement benefits w[ill](cid:13) actually be available during retirement.").(cid:13) Complete withdrawal liability, pursuant to 29 U.S.C.(cid:13) S 1383(a), is not incurred until an employer"(1)(cid:13) permanently ceases to have an obligation to contribute(cid:13) under the plan, or (2) permanently ceases all covered(cid:13) operations under the plan." Therefore, a cause of action(cid:13) under the MPPAA does not ripen until the employer fails to(cid:13) make a payment on the schedule set by the fund. See Bay(cid:13) Area Laundry & Dry Cleaning Pension Trust Fund, 522 U.S.(cid:13) at 200-01. As the Pension Benefit Guaranty Corporation(cid:13) ("PBGC")3 advises, under ERISA, as amended by the(cid:13) MPPAA, the date of withdrawal is the date that operations(cid:13) actually cease -- the date does not relate back to the date(cid:13) of filing of a Chapter 11 petition if operations have(cid:13) continued thereafter. See PBGC Op. Letter No. 87-1 (Jan.(cid:13) 23, 1987).(cid:13) With regard to alter ego liability in cases involving claims(cid:13) to pension benefits protected by ERISA, as amended by the(cid:13) MPPAA, there is "a federal interest supporting disregard of(cid:13) the corporate form to impose liability." Lumpkin v.(cid:13) Envirodyne Indus., Inc., 933 F.2d 449, 460-61 (7th Cir.(cid:13) 1991)("[T]he congressional intent of ERISA is to hold(cid:13) employers responsible for pension benefits, so that when(cid:13) the corporate form poses a bar to liability, ‘concerns for(cid:13) corporate separateness are secondary to what we view as(cid:13) the mandate of ERISA.’ ")(internal citations omitted).(cid:13) _________________________________________________________________(cid:13) 3. The PBGC is a corporation within the United States Department of(cid:13) Labor and is the agency charged with interpreting the MPPAA. Although(cid:13) its interpretations are not binding, they require substantial deference.(cid:13) See Cent. States, Southeast & Southwest Areas Pension Fund v. Nitehawk(cid:13) Express, Inc., 223 F.3d 483, 491 (7th Cir. 2000); Penn Cent. Corp. v.(cid:13) Western Conference of Teamsters Pension Trust Fund , 75 F.3d 529, 534(cid:13) (9th Cir. 1996)(stating that the court is "obligated to defer to the PBGC’s(cid:13) interpretation ‘even if reasonable minds could differ as to the proper(cid:13) interpretation of the statute’ ").(cid:13) 5(cid:13) In the instant case, the district court held that the(cid:13) trustee of the bankruptcy estate, rather than Appellant,(cid:13) was the proper party to pursue the present action. 4 That(cid:13) court reasoned that Appellant’s alleged injuries were the(cid:13) "property of the bankruptcy estate," Appellant’s Br., Ex. B(cid:13) at 6, and would "impact[ ] Twin directly and all of Twin’s(cid:13) creditors indirectly." Id. at 9.(cid:13) Certainly the district court was correct that once a(cid:13) company or individual files for bankruptcy, creditors lack(cid:13) standing to assert claims that are "property of the estate."(cid:13) The Bankruptcy Code defines the "estate" as"all legal or(cid:13) equitable interests of the debtor in property as of the(cid:13) commencement of the case," 11 U.S.C. S 541(a)(1), as well(cid:13) as "[a]ny interest in property that the estate acquires after(cid:13) the commencement of the case." Id. at 541(a)(7). This(cid:13) definition is given broad application and includes"all kinds(cid:13) of property, including . . . causes of action . . . ." United(cid:13) States v. Whiting Pools, Inc., 462 U.S. 198, 205 n.9 (1983).5(cid:13) Moreover, at least in some circuits, a trustee in bankruptcy(cid:13) may maintain a "veil piercing" suit or alter ego action on(cid:13) behalf of a bankrupt corporation where the claim alleged(cid:13) involves a generalized injury to all creditors. See, e.g., Koch(cid:13) Refining v. Farmers Union Cent. Exch., Inc., 831 F.2d 1339,(cid:13) 1346-47 (7th Cir. 1987).6(cid:13) _________________________________________________________________(cid:13) 4. In this case, Twin filed for Chapter 11 liquidation. In a Chapter 11(cid:13) case, unless a trustee is appointed, the debtor becomes a "debtor in(cid:13) possession." 11 U.S.C. S 1101(1). As a debtor in possession in its(cid:13) Chapter 11 case, Twin possesses the powers of a trustee. 11 U.S.C.(cid:13) S 1107(a).(cid:13) 5. A cause of action is considered property of the estate if the claim(cid:13) existed at the commencement of the filing and the debtor could have(cid:13) asserted the claim on his own behalf under state law. Butner v. United(cid:13) States, 440 U.S. 48, 54 (1979).(cid:13) 6. The district court cites to, inter alia , Mangan v. Williams Sys. Ltd.,(cid:13) 1990 WL 92695 (E.D.N.Y. 1990), an unpublished district court opinion,(cid:13) as directly applicable here. In Mangan, plaintiff pension fund trustees(cid:13) brought an action to recover delinquent contributions and withdrawal(cid:13) liability that were the funding obligations of an insolvent employer.(cid:13) Plaintiffs claimed that the defendants dismantled the employer(cid:13) corporation and diverted its assets in order to evade the employer(cid:13) corporation’s obligations to make pension fund contributions and pay(cid:13) 6(cid:13) Here, however, Twin’s withdrawal liability is not property(cid:13) of the estate. Although Twin filed its bankruptcy petition on(cid:13) December 7, 1998, it did not cease operations until it(cid:13) entered into a Shutdown Agreement on December 25, 1998,(cid:13) and it continued contributions to the pension fund until(cid:13) January 25, 1999. Therefore, the claim for withdrawal(cid:13) liability did not arise until after the filing of the bankruptcy(cid:13) petition.7(cid:13) The claim for withdrawal liability is also not a legal or(cid:13) equitable interest of the debtor. In order for the claim to be(cid:13) the "legal or equitable interest of the debtor in property,"(cid:13) the claim must be a "general one, with no particularized(cid:13) injury arising from it." St. Paul Fire & Marine Ins. Co. v.(cid:13) Pepsico, Inc., 884 F.2d 688, 701 (2d Cir. 1989)("If a claim is(cid:13) a general one, with no particularized injury arising from it,(cid:13) and if that claim could be brought by any creditor of the(cid:13) debtor, the trustee is the proper person to assert the claim,(cid:13) and the creditors are bound by the outcome of the trustee’s(cid:13) action."). On the other hand, if the claim is specific to the(cid:13) creditor, it is a "personal" one and is a legal or equitable(cid:13) interest only of the creditor. A claim for an injury is(cid:13) personal to the creditor if other creditors generally have no(cid:13) interest in that claim. Koch Refining, 831 F.2d at 1348-49.8(cid:13) _________________________________________________________________(cid:13) withdrawal liability. The bankruptcy trustee also sued all but one of the(cid:13) defendants for fraudulent conveyance and breach of fiduciary duty.(cid:13) While allowing the plaintiff ’s "control group" claim to proceed to trial,(cid:13) the district court stayed the plaintiffs’ alter ego claims, noting that "[i]f(cid:13) the Trustee recovers against these defendants, it may be that plaintiffs’(cid:13) claims will be satisfied." The court explicitly declined to decide whether(cid:13) the plaintiffs’ claims were property of the debtor. We do not find the(cid:13) holding of this opinion persuasive contrary authority to our analysis(cid:13) here.(cid:13) 7. There is no claim here that the estate acquired an interest in the(cid:13) fund’s claim for withdrawal liability after the commencement of the(cid:13) bankruptcy case pursuant to 11 U.S.C. S 541(a)(7). Cf. O’Dowd v.(cid:13) Trueger, 233 F.3d 197, 203-04 (3d Cir. 2000)(holding that where a cause(cid:13) of action accrued pre-petition, and was also part of the original(cid:13) bankruptcy estate, a subsequent cause of action"traceable directly" to it(cid:13) is also estate property).(cid:13) 8. Thus, if, at the time of Twin’s filing, Appellant’s cause of action existed(cid:13) and was general, it would be the property of the bankruptcy estate and(cid:13) Appellant would lack standing to pursue the action.(cid:13) 7(cid:13) In this case, the injury is not insolvency stemming from(cid:13) Appellees’ actions. Here, the injury is the Appellees’ evasion(cid:13) of withdrawal liability. Withdrawal liability is not owed to(cid:13) Twin; rather, it is owed to the pension fund. Because the(cid:13) liability is owed only to the fund, the claim is personal to(cid:13) the Appellant. Moreover, absent a general creditors’(cid:13) interest, a trustee can only collect money that may be(cid:13) owing to the bankrupt entity. See Steinberg v. Buczynski,(cid:13) 40 F.3d 890, 892 (7th Cir. 1994) ( "If the corporation is(cid:13) injured by the shareholders’ disregard of corporate(cid:13) formalities . . . then the trustee can sue; otherwise he(cid:13) cannot."). Here, there is no general creditors’ interest in the(cid:13) statutorily imposed withdrawal liability owed to the fund.(cid:13) Rather, the action to recover the withdrawal liability has(cid:13) the character of an action for damages flowing from an(cid:13) alleged illegality against the fund. The alleged illegality may(cid:13) have caused other injuries in addition to those caused to(cid:13) the fund, but the direct injury to the fund -- the evasion of(cid:13) its statutory entitlement -- defines the nature of plaintiffs’(cid:13) claim as a personal one. See Apostolou v. Fisher , 188 B.R.(cid:13) 958, 968 (N.D. Ill. 1995)(holding that when a third-party’s(cid:13) actions injure both the individual creditor and the(cid:13) corporation, the individual creditor "may pursue a cause of(cid:13) action against a third-party outside bankruptcy for the(cid:13) direct injuries that the creditor, rather than the(cid:13) corporation, suffered"). As a result, Twin’s withdrawal(cid:13) liability is not part of the bankruptcy estate pursuant to(cid:13) section 541(a)(1) or (7). Consequently, the claim here(cid:13) cannot be the property of the estate. See Steinberg, 40 F.3d(cid:13) at 892.(cid:13) Appellees rely on a New Jersey bankruptcy case, Tsai v.(cid:13) Buildings by Jamie, Inc. (In re Buildings by Jamie, Inc.), 230(cid:13) B.R. 36 (D.N.J. 1998), to demonstrate that alter ego and(cid:13) veil piercing actions are the property of the bankruptcy(cid:13) estate. Their reliance, however, is misplaced. There, the(cid:13) trustee had standing to pursue an alter ego action on(cid:13) behalf of the corporate debtor to recover on a defaulted(cid:13) loan. Thus, the action was based on a general injury(cid:13) suffered by a corporate debtor prior to its bankruptcy filing.(cid:13) The cause of action in the present action arises from a(cid:13) statutorily imposed withdrawal liability that occurred after(cid:13) the filing of the bankruptcy petition.(cid:13) 8(cid:13) Furthermore, the In re Buildings by Jamie court held,(cid:13) consistent with our decision here, that under New Jersey(cid:13) law an alter ego action is an equitable remedy that may(cid:13) only be asserted by a corporation when it suffers harm.(cid:13) Here, Twin did not suffer harm from the Appellees’ evasion(cid:13) of withdrawal liability; only the Appellants suffered such(cid:13) harm. See, e.g., Steinberg, 40 F.3d at 892-93 (explaining in(cid:13) a similar case that "the only injured person here is the(cid:13) pension fund"). As a result, the injury is personal to the(cid:13) Appellants and only the creditor, not the bankruptcy(cid:13) trustee, can pursue the claim. See id. ("When a third party(cid:13) has injured not the bankrupt corporation itself but a(cid:13) creditor of that corporation, the trustee in bankruptcy(cid:13) cannot bring suit against the third party. He has no(cid:13) interest in the suit.").(cid:13) III.(cid:13) Appellees also argue that should this court hold that(cid:13) Appellant has standing, the district court’s decision to(cid:13) dismiss the amended complaint should still be affirmed on(cid:13) the alternate ground that it fails to state a claim upon(cid:13) which relief can be granted. We find that the Appellant has(cid:13) made the necessary showing for three of the four counts in(cid:13) its complaint.(cid:13) A. Counts I and II: Disregarding Corporate Formali-(cid:13) ties(cid:13) Abuses of the corporate form allow courts to impose(cid:13) liability on the corporation’s shareholders. The purpose of(cid:13) alter ego liability and piercing the corporate veil "is to(cid:13) prevent an independent corporation from being used to(cid:13) defeat the ends of justice, to perpetrate fraud, to(cid:13) accomplish a crime, or otherwise to evade the law . . . ."(cid:13) State Dep’t of Envtl. Protect. v. Ventron Corp., 94 N.J. 473,(cid:13) 500 (1983)(internal citations omitted).(cid:13) Piercing the corporate veil is a "tool of equity," Carpenters(cid:13) Health & Welfare Fund v. Kenneth R. Ambrose, Inc. , 727(cid:13) F.2d 279, 284 (3d Cir. 1983), a "remedy that is involved(cid:13) when [a subservient] corporation is acting as an alter ego of(cid:13) [a dominant corporation.]" Peter J. Lahny IV, Securitization:(cid:13) A Discussion of Traditional Bankruptcy Attacks and an(cid:13) 9(cid:13) Analysis of the Next Potential Attack, Substantive(cid:13) Consolidation, 9 Am. Bankr. Inst. L. Rev. 815, 865 (2001).(cid:13) In order to state a claim for piercing the corporate veil(cid:13) under New Jersey law, a plaintiff must show that: (1) one(cid:13) corporation is organized and operated as to make it a mere(cid:13) instrumentality of another corporation, and (2) the(cid:13) dominant corporation is using the subservient corporation(cid:13) to perpetrate fraud, to accomplish injustice, or to(cid:13) circumvent the law. See Craig v. Lake Asbestos of Quebec,(cid:13) Ltd., 843 F.2d 145, 149 (3d Cir. 1988); Major League(cid:13) Baseball Promotion Corp. v. Colour-Tex, Inc., 729 F. Supp.(cid:13) 1035, 1046 (D.N.J. 1990).9 Factors to be considered in(cid:13) determining whether to pierce the corporate veil include(cid:13) gross undercapitalization . . . ‘failure to observe(cid:13) corporate formalities, non-payment of dividends, the(cid:13) insolvency of the debtor corporation at the time,(cid:13) siphoning of funds of the corporation by the dominant(cid:13) stockholder, non-functioning of other officers or(cid:13) directors, absence of corporate records, and the fact(cid:13) that the corporation is merely a facade for the(cid:13) operations of the dominant stockholder or(cid:13) stockholders.’(cid:13) Craig, 843 F.2d at 150 (quoting American Bell, Inc. v.(cid:13) Federation of Telephone Workers, 736 F.2d 879, 886 (3d(cid:13) Cir. 1984)).(cid:13) Appellant alleges that defendants failed to maintain(cid:13) formal barriers between the management structures of(cid:13) _________________________________________________________________(cid:13) 9. Foodtown argues that Appellant must prove that the defendants are a(cid:13) "parent" of Twin, which they have failed to do. "Parent" corporations,(cid:13) however, are not the only parties liable under a veil piercing theory.(cid:13) Shareholders have also been found liable when they have totally(cid:13) dominated the corporation, failed to maintain the corporate identity, and(cid:13) used the corporation to perpetrate fraud, injustice or some other(cid:13) illegality. See, e.g., Conestoga Title Ins. Co. v. Premier Title Agency, Inc.,(cid:13) 328 N.J. Super. 460, aff ’d, 166 N.J. 2 (2000); In re Buildings by Jamie,(cid:13) Inc., 230 B.R. at 42 ("[W]hile in most cases courts have been willing to(cid:13) pierce the corporate veil in the parent-subsidiary context, given the ease(cid:13) with which the individual owners here altered their organizations and(cid:13) closely held assets, there appears to be no reason to limit the application(cid:13) of the rule to parent-subsidiary relationships.")(quoting Stochastic(cid:13) Decisions, Inc. v. DiDomenico, 236 N.J. Super. 388, 395 (App. Div. 1989).(cid:13) 10(cid:13) Foodtown and Twin; failed to maintain formal barriers(cid:13) between Foodtown and Twin for purposes of legal(cid:13) representation; commingled funds and other assets; and(cid:13) failed to observe other corporate formalities. Am. Compl.(cid:13) PP 79(a),(b),(c),(e). Furthermore, Appellant contends that(cid:13) Foodtown and Twin shared twelve of thirteen common(cid:13) directors and that at all times Twin’s Board of Directors(cid:13) was dominated and controlled by the Foodtown-affiliated(cid:13) Directors. Id. PP 69, 70. Appellant also claims that all of(cid:13) Foodtown’s shareholder/members were also members of(cid:13) Twin and that all the corporate defendants were common(cid:13) shareholder/members of Foodtown and Twin. Id. P 71.(cid:13) Appellant also claims that Foodtown and Twin shared the(cid:13) same principal office and registered office. Id. PP 72, 73.(cid:13) These allegations, accepted as true in consideration of a(cid:13) 12(b)(6) motion, support the first prong of the veil piercing(cid:13) test -- that Twin was merely an instrumentality of(cid:13) Foodtown.(cid:13) Appellant, however, must also allege that Foodtown used(cid:13) Twin to perpetrate fraud, to accomplish injustice, or to(cid:13) circumvent the law.10 Here, Appellant alleges, in(cid:13) _________________________________________________________________(cid:13) 10. Foodtown argues that the Appellant’s allegations do not meet the(cid:13) heightened pleading requirements for fraud. Foodtown’s Br. at 54. When(cid:13) a cause of action seeks to pierce the corporate veil on the basis of fraud,(cid:13) it is subject to Fed. R. Civ. P. 9(b). Coyer v. Hemmer, 901 F. Supp. 872,(cid:13) 883-84 (D.N.J. 1995). The purpose of Rule 9(b) "is [to] provide(cid:13) defendants with notice of the precise misconduct that is alleged and to(cid:13) protect defendants’ reputations by safeguarding them against spurious(cid:13) allegations of immoral and fraudulent behavior." In re Burlington Coat(cid:13) Factory Sec. Litig.,114 F.3d 1410, 1418 (3d Cir. 1997). In order to put(cid:13) defendants on notice Rule 9(b) requires that "in all averments of fraud or(cid:13) mistake, the circumstances constituting fraud or mistake shall be stated(cid:13) with particularity." For example, the requirements of rule 9(b) may be(cid:13) satisfied if the complaint describes the circumstances of the alleged(cid:13) fraud with "precise allegations of date, time, or place" or by using some(cid:13) means of "injecting precision and some measure of substantiation into(cid:13) their allegations of fraud." Naporano Iron & Metal Co. v. Amer. Crane(cid:13) Corp., 79 F. Supp. 2d 494, 511 (D.N.J. 1999)(internal citations omitted);(cid:13) see also Seville Indus. Mach. Corp. v. Southmost Mach. Corp., 742 F.2d(cid:13) 786, 791 (3d Cir. 1984). Although the complaint does not contain(cid:13) specifics concerning the date, time or place of the allegations, the(cid:13) complaint does plead the allegations with some particularity.(cid:13) 11(cid:13) subparagraph 79(d), that the Appellees diverted monies(cid:13) destined for withdrawal liability. Appellant’s enumeration of(cid:13) Appellees’ actions, consisting of diverting funds, fictitious(cid:13) invoices and kickbacks, "inject[s] precision and some(cid:13) measure of substantiation into their allegations of fraud,"(cid:13) consistent with Rule 9(b). See Naporano Iron & Metal, 79 F.(cid:13) Supp. 2d at 511. When viewed in the light most favorable(cid:13) to the Appellant, these allegations can support a claim that(cid:13) Appellees used Twin "to perpetrate fraud, to accomplish(cid:13) injustice, or to circumvent the law." Major League Baseball,(cid:13) 729 F. Supp. at 1046.(cid:13) B. Count III: Fiduciary Duties(cid:13) The third count of Appellant’s complaint alleges that(cid:13) "[t]he individual officers and directors of Twin and(cid:13) Foodtown are fiduciaries with respect to Union Employees(cid:13) who were Plan participants represented by Plaintiff." Am.(cid:13) Compl. P 85. Appellees argue that they are not fiduciaries(cid:13) under ERISA. The district court, however, stated that(cid:13) Appellant’s fiduciary duty claims "were being brought under(cid:13) state and common law and not under ERISA." Appellant’s(cid:13) Br., Ex. B, at 4 & n.2 ("The Fund’s theory of liability is not(cid:13) based on Defendants’ status as ‘fiduciaries’ per se under(cid:13) ERISA but as fiduciaries to the Fund as a creditor of Twin,(cid:13) an insolvent corporation.")(quoting Pl.’s Br. at 36).(cid:13) Generally, corporate directors owe a fiduciary duty only(cid:13) to the corporation’s shareholders. "This duty includes an(cid:13) obligation not to take action which would be adverse to the(cid:13) Corporation’s interests." Ayr Composition, Inc. v. Rosenburg,(cid:13) 261 N.J. Super. 495, 501 (App. Div. 1993)(internal(cid:13) quotations omitted). Once a corporation becomes insolvent,(cid:13) however, the directors assume a fiduciary or "quasi-trust"(cid:13) duty to the corporation’s creditors. See id. at 505. In this(cid:13) quasi-trust relationship, "officers and directors cannot(cid:13) prefer one creditor over another, and they have a‘special(cid:13) duty not to prefer themselves.’ " In re Stevens, 476 F. Supp.(cid:13) 147, 153 n.5 (D.N.J. 1979). Based on the allegations here,(cid:13) the trial court could find that the individual officers and(cid:13) directors of Twin and Foodtown breached their duties(cid:13) under their quasi-trust relationship by "withholding and(cid:13) diverting for their own benefit the monies that should have(cid:13) been used to make . . . contributions." Am. Comp.P 85.(cid:13) 12(cid:13) C. Count IV: Aiding and Abetting Fiduciary Duties(cid:13) In the fourth count of its complaint, Appellant claimed(cid:13) that "[a]s an ‘employer’ under ERISA, Twin, Foodtown and(cid:13) Defendant Control Group members are fiduciaries with(cid:13) respect to Union Employees who were Plan participants(cid:13) represented by Plaintiff." Id. P 88.11 Appellant contends that(cid:13) "Defendants jointly and severally aided and abetted the(cid:13) breach of fiduciary duties owed to Plan participants by(cid:13) Twin, Foodtown and the Defendant Control Group(cid:13) members, by knowingly and willfully participating in those(cid:13) entities’ breach of their fiduciary duties under ERISA." Id.(cid:13) P 89. Although the district court characterized Appellant’s(cid:13) fiduciary duty claim in count III of the complaint as a(cid:13) "common law claim," it is not possible to understand(cid:13) Appellant’s claim of aiding and abetting fiduciary duties in(cid:13) this manner.(cid:13) In this count, Appellant’s claim is that Twin and(cid:13) Foodtown breached fiduciary duties owed under ERISA. In(cid:13) order to acquire fiduciary status under ERISA, the party(cid:13) must (1) be named as a fiduciary in the instrument(cid:13) establishing the plan; (2) named as a fiduciary pursuant to(cid:13) a procedure specified in a plan instrument; or (3) fall within(cid:13) the statutory definition of fiduciary. Glaziers &(cid:13) Glassworkers v. Newbridge Sec., 93 F.3d 1171, 1179 (3d(cid:13) Cir. 1996). Section 1002(21)(A) provides that(cid:13) a person is a fiduciary with respect to a [pension] plan(cid:13) to the extent (i) he exercises any discretionary(cid:13) authority or discretionary control respecting(cid:13) management of such plan or exercises any authority or(cid:13) control respecting management or disposition of its(cid:13) assets, (ii) he renders investment advice for a fee or(cid:13) other compensation, direct or indirect, with respect to(cid:13) any monies or other property of such plan, or has any(cid:13) _________________________________________________________________(cid:13) 11. We do not consider Appellant’s claim that the"Defendant Control(cid:13) Group" is liable for aiding and abetting a breach of fiduciary duty. This(cid:13) is the only mention of a "control group" theory and Appellant presents(cid:13) no arguments in its brief on this matter. Furthermore, in the district(cid:13) court opinion, the Judge noted that in a status conference before(cid:13) Magistrate Judge Chesler, the fund agreed to omit its controlled-group(cid:13) claim from the Amended Complaint. See Appellant’s Br., Ex. B at 3 n.1.(cid:13) 13(cid:13) authority or responsibility to do so, or (iii) he has any(cid:13) discretionary authority or discretionary responsibility(cid:13) in the administration of the plan . . . .(cid:13) 29 U.S.C. S 1002(21)(A). In order to be found liable for(cid:13) aiding and abetting a breach of a fiduciary duty, one must(cid:13) demonstrate that the party knew that the other’s conduct(cid:13) constituted a breach of a fiduciary duty and gave(cid:13) substantial assistance or encouragement to the other in(cid:13) committing that breach. See Resolution Trust Corp. v.(cid:13) Spagnoli, 811 F. Supp. 1005, 1014 (D.N.J. 1993).(cid:13) Here, the only fiduciary named in the collective(cid:13) bargaining agreements is the Appellant. There are no(cid:13) allegations that Twin or Foodtown had a role in the(cid:13) management and investment of the Fund’s assets.(cid:13) Moreover, Twin and Foodtown are not automatically(cid:13) fiduciaries pursuant to ERISA, as amended by the MPPAA,(cid:13) even if they are "employers." See Hozier v. Midwest(cid:13) Fasteners, Inc., 908 F.2d 1155, 1158 (3d Cir.(cid:13) 1990)("Fiduciary duties under ERISA attach not just to(cid:13) particular persons, but to particular persons performing(cid:13) particular functions. Thus, when employers themselves(cid:13) serve as plan administrators they assume fiduciary status(cid:13) only when and to the extent that they function in their(cid:13) capacity as plan administrators.")(internal quotations(cid:13) omitted). Appellant argues that Appellees "knowingly and(cid:13) willfully participat[ed] in [Twin and Foodtown’s] breach of(cid:13) their fiduciary duties under ERISA," but Appellant has not(cid:13) alleged any basis upon which Twin and Foodtown owe(cid:13) fiduciary duties under ERISA. Therefore, this count must(cid:13) be dismissed for failure to state a claim.(cid:13) IV.(cid:13) Prior to instituting an action for withdrawal liability,(cid:13) ERISA requires written notice to the withdrawing party of(cid:13) the amount of withdrawal liability claimed and a demand(cid:13) for payment. 29 U.S.C. S 1399(b)(1). Appellee Vitale argues(cid:13) that Appellant failed to notify him that it would pursue an(cid:13) action against Vitale seeking Twin’s withdrawal liability.(cid:13) Vitale claims that because this notice requirement is an(cid:13) 14(cid:13) unwaivable precondition for instituting an action, the(cid:13) complaint should be dismissed.12(cid:13) Although the notice requirement cannot be waived, in(cid:13) this case the notice sent to Twin provided sufficient notice(cid:13) to Twin’s alter egos and satisfies 29 U.S.C.S 1399(b)(1).(cid:13) Due to the remedial purpose of ERISA and the MPPAA, the(cid:13) MPPAA’s notice provisions are liberally construed to protect(cid:13) pension plan participants. IUE AFL-CIO Pension Fund v.(cid:13) Barker & Williamson, Inc., 788 F.2d 118, 127 (3d Cir.(cid:13) 1986). For purposes of this issue, the present situation is(cid:13) analogous to a control group, in which all members of the(cid:13) control group are treated as a single employer. Like a(cid:13) control group, a corporation and its alter ego are essentially(cid:13) a single employer because in all aspects of business the two(cid:13) function as a single entity. It is unnecessary to notify a(cid:13) corporation’s alter ego because notice is accomplished(cid:13) through the alter ego relationship. Therefore, notice to Twin(cid:13) served as notice to its alter egos.(cid:13) V.(cid:13) Foodtown also argues that Twin "unconditionally released(cid:13) all the estate’s claims against the Foodtown Appellees."(cid:13) Foodtown Br. at 60. In a consent order approving Twin’s(cid:13) settlement with Foodtown and various other corporate(cid:13) defendants, a general release provided, in pertinent part,(cid:13) that "[r]eleasors hereby remise, release and forever(cid:13) discharge by these presents . . . and do hereby remise,(cid:13) release and forever discharge [the Foodtown Appellees] . . .(cid:13) from any and all manners of action . . . , causes of action,(cid:13) suits, debts, sums of money . . . now known or unknown,(cid:13) or hereafter becoming known, from the beginning of the(cid:13) world until the date of this General Release." Consent Order(cid:13) Approving Settlements with Foodtown, Heller and Lloyd’s,(cid:13) Dismissal of Lawsuit and Entry into Mutual Releases,(cid:13) _________________________________________________________________(cid:13) 12. In support of his argument, Vitale cites to Connors v. Peles, 724 F.(cid:13) Supp. 1538 (W.D. Pa. 1989) and Canario v. Lidelco, Inc., 782 F. Supp.(cid:13) 749 (E.D.N.Y. 1992). In both cases, the courts first determined that the(cid:13) defendants were not the alter egos of the corporation, and then(cid:13) discussed the notice issue in dicta.(cid:13) 15(cid:13) Supp. App. II, SA 358. Foodtown claims that this release(cid:13) bars the present action.(cid:13) Appellant argues that the settlement agreement(cid:13) "expressly stated that the [release given by the Debtor to(cid:13) the Foodtown Appellees] . . . shall not be deemed to be a(cid:13) release of the Fund’s claim" in this action. Appellant’s Br.(cid:13) at 3, 9. According to Foodtown, however, the inclusion of(cid:13) this provision demonstrates that Twin "generally released(cid:13) the Foodtown Appellees only after due notice to the(cid:13) Appellant, and that Appellant made a deliberate decision to(cid:13) waive its right to object." Foodtown Br. at 27.(cid:13) Whether the release precludes the present lawsuit(cid:13) depends on the characterization of the underlying claim.(cid:13) Because Appellant’s cause of action is based on withdrawal(cid:13) liability under ERISA and is not considered property of the(cid:13) estate, Twin’s release does not affect Appellant’s claims.(cid:13) Even Foodtown acknowledges that its argument that(cid:13) Appellant lacks standing is based on a theory of"property(cid:13) of the estate." Id. at 26 (arguing that"Appellant lacked(cid:13) standing . . . because such claims, as property of the(cid:13) Debtor’s estate, could only be brought by the Debtor").(cid:13) Therefore, Twin’s general release does not bar the present(cid:13) action.(cid:13) A True Copy:(cid:13) Teste:(cid:13) Clerk of the United States Court of Appeals(cid:13) for the Third Circuit(cid:13) 16(cid:13)
