Finn Pette et al v. International Union of Operating Engineers, No. 2:2012cv09324 - Document 151 (C.D. Cal. 2013)
Court Description: ORDER GRANTING DEFENDANTS MOTIONS TO DISMISS 83 , 84 87 , 88 , 91 , 92 by Judge Dean D. Pregerson: Plaintiffs RICO claims (Claims 1-4) and Seventh Claim for Aiding and Abetting are dismissed with prejudice. Plaintiffs Fifth Claimfor violation of the LMRDA and Sixth Claim for Breach of Fiduciary Duty are dismissed with leave to amend. Any amended complaint shall be filed within fourteen days of the date of this order. (lc). Modified on 10/9/2013. (lc).
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Finn Pette et al v. International Union of Operating Engineers Doc. 151 1 2 O 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 CENTRAL DISTRICT OF CALIFORNIA 10 11 FINN PETTE, et al., 12 Plaintiff, 13 14 15 16 v. INTERNATIONAL UNION OF OPERATING ENGINEERS, a trade union, etc., et al., Defendants. ___________________________ ) ) ) ) ) ) ) ) ) ) ) ) Case No. CV 12-09324 DDP (PJWx) ORDER GRANTING MOTIONS TO DISMISS [Dkt. Nos. 83, 84, 87, 88, 91, 92] 17 Presently before the court are five motions to dismiss filed 18 19 by several, but not all, of the dozens of defendants in this 20 matter. 21 oral argument, the court grants the motions and adopts the 22 following order. 23 I. Having considered the submissions of the parties and heard Background 24 Plaintiffs are current and former members and officers of 25 Local 501 of the International Union of Operating Engineers (“Local 26 501”). 27 Southern California and Southern Nevada. In their Second Amended 28 Complaint (“SAC”), Plaintiffs bring eight claims against 43 Local 501 represents operating engineers throughout Dockets.Justia.com 1 Defendants, including four claims for violations of the Racketeer 2 Influenced and Corrupt Organizations Act (“RICO”) 18 U.S.C §1961 et 3 seq., a violation of the Labor-Management Reporting and Disclosure 4 Act (“LMRDA”) 29 U.S.C. §401 et seq., a breach of fiduciary duties 5 under §502(a)(2), 29 U.S.C. § 1132(a)(2) of the Employee Retirement 6 Income Security Act (“ERISA”) 29 U.S.C. §1002 et seq., and aiding 7 and abetting. 8 Plaintiffs assert that Defendants International Union of 9 Operating Engineers (“IUOE”), 24 associated individuals, Able 10 Engineering Services (“Able”), its CEO Paul Bensi, ABM Engineering 11 Services (“ABM”), its President Jim Scranton, and its employee 12 Cornell Sneeks (collectively, “Moving Defendants”) conspired to 13 embezzle funds and divert assets belonging to Local 501, its 14 employees, and its benefit funds. 15 Defendant IUOE is a trade union that represents operating 16 engineers in the construction industry and stationary engineers in 17 the service industry. (SAC ¶ 26 at 5.) Local 501 is a stationary 18 local of IUOE. (Id.) Plaintiffs allege IUOE participated in 19 embezzlement schemes with Able Defendants and ABM Defendants to 20 avoid required payments to Local 501 and its benefit funds. The SAC 21 alleges Defendant Vincent Giblin, the former General President of 22 IUOE, threatened to remove Plaintiff Pette and other Local 501 23 officials from their officer positions (SAC ¶ 101, 108-23, 187-96), 24 prevented Local 501 leadership from investigating diversion of 25 assets (Id.), required local union officers to contribute hundreds 26 and thousands of dollars per year to IUOE’s political action fund 27 (Id. ¶ 75-80), and forced local unions to use CVS Caremark 28 (“Caremark”) for prescription and benefit management. The SAC also 2 1 alleges Defendant James T. Callahan, the current IUOE president, 2 continues these practices. (Id. ¶¶ 196, 202-04) 3 allege that IUOE retained Defendant James Zazzali, a retired New 4 Jersey Supreme Court Chief Justice and current IUOE Ethics Officer, 5 to bolster false ethics charges. 6 Defendants received kickbacks. (Id. ¶ 1, 166, 168, 190, 232.) 7 Plaintiffs further According to the SAC, all IUOE Defendant Able is an employer that provides onsite stationary 8 engineering and facility maintenance services to hotels and other 9 real estate assets thought the United States. (Able Motion to 10 Dismiss Plaintiffs’ SAC at 1.) 11 collective bargaining agreement (“CBA”) that governs the terms and 12 conditions of Able’s employment of Local 501 members. (Id.) 13 Defendant ABM is a signatory to contracts with IUOE local unions 14 and controls 70% of stationary engineering positions in California. 15 (SAC ¶ 155.) ABM’s contracts with Local 501 require that any 16 building unionized through Local 501 must remain unionized in 17 subsequent labor contracts. (Id.) 18 Able and Local 501 have a Plaintiffs assert Able and ABM breached union contracts by 19 conspiring with IUOE to operate double-breasted (side by side 20 operation of union and non-union workforces) (SAC, ¶¶ 112, 166, 21 168-71), failing to make required benefit contributions to various 22 union funds as required by the companies’ CBA (Id. at ¶¶ 112, 154, 23 156, 158-60), shorting and concealing underpayments to the Health 24 and Welfare fund and the Apprenticeship Fund by employing retired 25 workers (Id. at ¶¶ 154, 157, 163, 172-5), using influence to 26 prevent audits (Id. at ¶¶ 154-58), impeding fair union elections by 27 blocking electioneering emails to union members from ‘resistance’ 28 candidates, while permitting through their mail services 3 1 electioneering emails sent on behalf of candidates approved by IUOE 2 (Id. at 197, 249), and retaliating against Plaintiffs because of 3 their union activities (Id. at 247). Plaintiffs also allege 4 Defendant ABM targeted Local 501 employees sympathetic to 5 Plaintiffs’ lawsuit. (Id. ¶ 247). Lastly, Plaintiffs assert that 6 ABM and Able conspired and aided and abetted “fraudulent schemes” 7 that were part of an overarching scheme to defraud Local 501. 8 Defendants now move to dismiss claims one through seven.1 9 II. 10 2 Legal Standard A complaint will survive a motion to dismiss when it contains 11 “sufficient factual matter, accepted as true, to state a claim to 12 relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 13 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 14 570 (2007)). 15 “accept as true all allegations of material fact and must construe 16 those facts in the light most favorable to the plaintiff.” Resnick 17 v. Hayes, 213 F.3d 443, 447 (9th Cir. 2000). 18 need not include “detailed factual allegations,” it must offer 19 “more than an unadorned, the-defendant-unlawfully-harmed-me 20 accusation.” 21 allegations that are no more than a statement of a legal conclusion 22 “are not entitled to the assumption of truth.” Id. at 679. 23 other words, a pleading that merely offers “labels and When considering a Rule 12(b)(6) motion, a court must Iqbal, 556 U.S. at 678. Although a complaint Conclusory allegations or In 24 25 26 1 Defendants ABM, Scranton, and Sneeks also join in Able and the IUOE’s motions. 2 27 28 Though no Defendant has moved to dismiss Plaintiffs’ eight cause of action for unfair competition under California Business & Professions Code § 17200, Plaintiffs have expressed a desire to amend that cause of action. 4 1 conclusions,” a “formulaic recitation of the elements,” or “naked 2 assertions” will not be sufficient to state a claim upon which 3 relief can be granted. 4 quotation marks omitted). 5 Id. at 678 (citations and internal “When there are well-pleaded factual allegations, a court should 6 assume their veracity and then determine whether they plausibly 7 give rise to an entitlement of relief.” Id. at 679. 8 must allege “plausible grounds to infer” that their claims rise 9 “above the speculative level.” Twombly, 550 U.S. at 555. Plaintiffs 10 “Determining whether a complaint states a plausible claim for 11 relief” is a “context-specific task that requires the reviewing 12 court to draw on its judicial experience and common sense.” 13 556 U.S. at 679. 14 III. Discussion Iqbal, 15 A. 16 Defendants contend that Plaintiffs lack standing to bring RICO RICO claims 17 claims under 18 U.S.C. § 1961. 18 action to “[a]ny person injured in his business or property by 19 reason of a violation” of the RICO statute. 18 U.S.C. § 1964(c). To 20 establish statutory standing, therefore, a plaintiff must show that 21 the RICO violation “proximately caused an injury to his business or 22 property.” 23 972 (9th Cir.2008). 24 “concrete financial loss.” 25 897, 898-900 (9th Cir. 2005). 26 RICO provides a private cause of Canyon County v. Syngenta Seeds, Inc., 519 F.3d 969, Moreover, the injury must constitute a Id. at 975; Diaz v. Gates, 420 F.3d Plaintiffs contend that they have adequately pled concrete 27 financial injury to business or property because the SAC alleges 28 that Local 501 and ERISA funds suffered monetary losses. 5 (e.g. 1 Opp., Dkt. No. 125 at 13-14.) 2 IUOE, Able, and ABM conspired to deprive Local 501's Apprenticeship 3 Fund, Health & Welfare Fund, and General Welfare Fund of mandatory 4 contributions. 5 these contribution shortfalls “harmed Local 501’s ability to 6 operate.” (Id. ¶ 162.) 7 For example, Plaintiffs allege that (SAC ¶¶ 157-162.) The SAC further alleges that Plaintiffs’ allegations are, however, insufficient for two 8 reasons. 9 damage to “his business or property.” 18 U.S.C. § 1964(c) (emphasis First, Section 1964(c) requires that a plaintiff suffer 10 added); Sparling v. Hoffman Const. Co., 864 F. 2d 635, 640-41 (9th 11 Cir. 1988) (shareholders lacked RICO standing because their 12 injuries derived from injury to the corporation); Adams-Lundy v. 13 Ass’n of Prof’l Flight Attendants, 844 F.2d 245, 250 (5th Cir. 14 1988) (union members lacked RICO standing where “financial 15 improprieties occurred with union funds and directly injured solely 16 the union.”); United Bhd. Of Carpenters and Joiners of Am. v. Bldg. 17 and Constr. Trades Dep’t, 911 F.Supp.2d 1118, 1124-26 (E.D. Wash. 18 2012)(finding standing lacking where damaged property did not 19 belong to any named plaintiff). 20 individuals, and bring purported class claims on behalf of other 21 individuals.3 22 and its ERISA funds, none of which is a named plaintiff in this 23 case. Here, Plaintiffs are sixteen The injuries alleged, however, inhere to Local 501 24 25 3 26 27 28 While the SAC does include some allegations that certain individual Plaintiffs were improperly terminated or otherwise deprived of certain employment opportunities in 2009 and 2010 (e.g. ¶¶ 119, 138, 140, 185), those individual Plaintiffs explicitly limit their claims to events occurring on or after May 1, 2012. (SAC ¶¶ 9-10.) 6 1 Second, and on a related note, there must be a “direct 2 relationship” between the injury and the alleged racketeering 3 activities. 4 (2010); United Bhd. Of Carpenters; 911 F.Supp.2d at 1125-26. 5 Plaintiffs, however, at best allege only indirect injury to 6 themselves. 7 fund payments “would have, had they been paid, provided for payment 8 of benefits in future years . . . . 9 Welfare Fund, Able and ABM deprived Local 501 members of this Hemi Group, LLC v. City of New York, 559 U.S. 1, 9 For instance, the SAC alleges that withheld health By underfunding the Health & 10 supplemental benefit cushion.” 11 however, would necessarily flow from the earlier injury to the 12 Health & Welfare Fund. 13 “plaintiffs who have suffered ‘passed on’ injury - that is, injury 14 derived from a third party’s direct injury - lack statutory 15 standing.” 16 Cir. 2002).4 17 (SAC ¶ 160.) Any such harm, As the Ninth Circuit has recognized, Mendoza v. Zirkle Fruit Co., 301 F.3d 1163, 1169 (9th The various racketeering acts alleged in the SAC harmed Local 18 501 and its benefit funds, not Plaintiffs. 19 identified any non-speculative injury to themselves, any such harm 20 would be the indirect result of direct injuries to the nonparty 21 union and plans. 22 1964(c), and lack statutory standing to bring their RICO claims. 23 B. Even if Plaintiffs had Thus, Plaintiffs cannot satisfy 18 U.S.C. § LMRDA claim 24 25 26 27 28 4 Even if Plaintiffs’ alleged injuries were sufficiently direct, they are nevertheless fatally speculative. See Steele v. Hosp. Corp. of Am., 36 F.3d 69, 71 (9th Cir. 1994) (holding no RICO standing where alleged depletion of insurance benefits had not yet required plaintiff to incur any expense.) 7 1 Title I of the LMRDA provides union members with a “Bill of 2 Rights” designed to guarantee members’ ability to participate in 3 union decisions and to protect members’ freedoms of speech and 4 assembly. 5 Drivers, Helpers, Warehousemen, & Packers v. Crowley, 467 U.S. 526, 6 536 (1984). 7 member of a labor organization shall have equal rights . . . to 8 attend membership meetings, and to participate in the deliberations 9 and voting upon the business of such meetings.” Local No. 82 Furniture & Piano Moving, Furniture Store The LMRDA states, in relevant part, that “[e]very 29 U.S.C. 10 §411(a)(1). 11 assemble freely with other members; and to express any views 12 arguments, or opinions.” 13 Union members also “have the right to meet and 29 U.S.C. § 411(a)(2). Plaintiffs contend that the IUOE Defendants, “through their 14 schemes to usurp control of Local 501 [. . .], deprived Plaintiffs 15 of their right to freely meet and assemble to express their views 16 (Able and ABM used managerial employees to intimidate members, and 17 the IUOE, which now controls Local 501, does nothing to stop it).” 18 (Opp., Dkt. No. 125 at 24.) 19 their 119-page complaint these allegations lie. 20 reference to potentially intimidating conduct by ABM and Able, but 21 the majority of these allegations relate to claims which Plaintiffs 22 concede are moot. 23 allegation seeming to fit Plaintiffs’ description asserts that an 24 ABM vice president took pictures of certain unnamed Local 501 25 members in December 2012. 26 Plaintiffs do not identify where in (See, e.g., SAC ¶¶ 197, 249.) The SAC does make The only other (SAC ¶ 248.) A generous reading of Plaintiffs’ submissions suggests that 27 Plaintiffs intend to allege that the IUOE Defendants ratified some 28 sort of activity undertaken by Local 501, perhaps in collusion with 8 1 ABM and Able, in violation of Section 101(a) of the LMRDA. 2 cases, international unions may be held liable for the actions of a 3 local. 4 Workers, 989 F.2d 1534, 1543 (holding international liable for 5 local’s illegal actions only if it ratified such actions knowing 6 that the local intended to suppress dissent); Chapa v. Local 18, 7 737 F.2d 929, 932 (5th Cir. 1984). 8 relate to Plaintiffs’ Title I allegation, however, refers only to 9 activity by an ABM employee, without any description of any In some See Moore v. Local Union 569 of Int’l Bh’d of Elec. The only paragraph seeming to 10 improper conduct by Local 501, let alone knowledge or approval of 11 IUOE. 12 amend. Plaintiffs’ LMRDA claim is therefore dismissed with leave to See Fed. R. Civ. P. 8(a). 13 C. 14 Plaintiffs’ Sixth Claim for Breach of Fiduciary Duties Under Breach of Fiduciary Duty 15 ERISA or Common law fails to provide a plain statement of the 16 claim, and is little more than a bare recitation of the elements of 17 the claim. 18 Defendants,” but do not further identify any defendant beyond the 19 conclusory assertion that “Defendants identified herein as 20 Administrators and/or Trustees and/or IUOE executives and/or Local 21 Executives have assumed fiduciary obligations to Plaintiffs.” 22 ¶ 344. 23 which any administrator or trustee or executive owed a fiduciary 24 duty. 25 of a General Pension Fund plan, Health and Welfare Fund plan, and 26 Operating Engineers Trusts, “among others,” it does not state 27 whether one or multiple defendants breached duties to one, two, or Plaintiffs assert the claim “Against Specific SAC Moreover, nowhere does the SAC identify any ERISA plan to While the SAC does state that Plaintiffs are beneficiaries 28 9 1 all of the named or unnamed plans. 2 dismissed. The claim is, therefore, Fed. R. Civ. P. 8(a); Iqbal, 556 U.S. at 678. 3 D. 4 “Congress has not enacted a civil aiding and abetting Aiding and Abetting 5 statute.” 6 Denver, N.A., 511 U.S. 164, 182 (1994). 7 liability is therefore limited to those statutes in which it is 8 imposed. 9 Cir. 2006); In re Easysaver Rewards Litigation, 737 F.Supp.2d 1159, Central Bank of Denver, N.A. v. First Interstate Bank of Aiding and abetting Id., Freeman v. DirecTV, Inc., 457 F.3d 1001, 1006 (9th 10 1181 (S.D. Cal. 2010). 11 dismissed with prejudice. 12 IV. 13 Plaintiffs’ Aiding and Abetting claim is Conclusion For the reasons stated above, Defendants’ Motions are GRANTED. 14 Plaintiffs’ RICO claims (Claims 1-4) and Seventh Claim for Aiding 15 and Abetting are dismissed with prejudice. 16 for violation of the LMRDA and Sixth Claim for Breach of Fiduciary 17 Duty are dismissed with leave to amend. 18 shall be filed within fourteen days of the date of this order.5 Plaintiffs’ Fifth Claim Any amended complaint 19 20 IT IS SO ORDERED. 21 22 Dated: October 9, 2013 DEAN D. PREGERSON United States District Judge 23 24 25 26 27 28 5 Any amended complaint shall also include amendments to Plaintiffs’ unfair competition claim, to which no Defendant appears to object. 10
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