Teamsters Local Union No. 705 v. Burlington Northern Santa Fe C

In the
United States Court of Appeals
For the Seventh Circuit
No. 11-3705
TEAMSTERS LOCAL UNION NO . 705, et al.,
Plaintiffs-Appellants,
v.
BURLINGTON NORTHERN SANTA FE , LLC
(f/k/a Burlington Northern Sante Fe
Corporation), et al.,
Defendants-Appellees.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 10 C 7378 — Samuel Der-Yeghiayan, Judge.
ARGUED OCTOBER 23, 2012 — DECIDED JANUARY 24, 2014
Before FLAUM and SYKES, Circuit Judges, and RANDA, District
Judge.*
*
The Honorable Rudolph T. Randa, District Judge for the United States
(continued...)
2 No. 11-3705
SYKES, Circuit Judge. Berkshire Hathaway, Inc., owns a
group of railway companies affiliated with the Burlington
Northern Santa Fe railroad, which in turn owns the Corwith
Intermodal Rail Yard in Chicago. (For simplicity, we refer to
these companies and their corporate parent as “the Railroad.”)
From 2000 to 2010, the Railroad used an independent contrac-
tor, Rail Terminal Services, Inc. (“RTS”), to operate Corwith.
The Teamsters Local Union No. 705 represented RTS’s employ-
ees, who were covered by the union’s health-and-pension plan.
The Railroad contributed to the plan, as required by its contract
with RTS.
In 2010 the Railroad decided to take the Corwith work
in-house. Before doing so, however, the Railroad asked for
wage-and-benefits concessions from Local 705. The union
agreed. But when the Railroad ended its relationship with RTS
and moved the Corwith work in-house, it entered into a labor
agreement with a different union, the Transportation Commu-
nications International Union (“TCIU”). RTS advised its
Corwith employees of the Railroad’s decision and terminated
their employment. The employees could reapply with the
Railroad, but its wage-and-benefits package with TCIU was not
as generous as the agreement between RTS and the Teamsters.
Local 705 and six employees filed this proposed class action
against the Railroad, RTS, and TCIU, alleging several claims
for violation of the Employee Retirement Income Security Act
of 1974 (“ERISA”), 29 U.S.C. §§ 1001 et seq., and conspiracy to
*
(...continued)
District Court for the Eastern District of Wisconsin, sitting by designation.
No. 11-3705 3
violate ERISA. The district court dismissed the complaint for
failure to state a claim. See FED . R. CIV . P. 12(b)(6). The plaintiffs
have narrowed their case on appeal, focusing on just two
claims: (1) unlawful interference with the attainment of
retirement benefits in violation of § 510 of ERISA, 29 U.S.C.
§ 1140; and (2) a related conspiracy claim.
We affirm the dismissal of these claims. As relevant here,
§ 510 of ERISA makes it unlawful for “any person to discharge,
fine, suspend, expel, discipline, or discriminate against a
participant” in an employee benefits plan for the purpose of
interfering with his attainment of benefits under the plan.
29 U.S.C. § 1140. Although liability under this statute is not
limited to employers, the plaintiffs allege only an unlawful
“discharge,” which presupposes an employment relationship.
Only RTS was in an employment relationship with the mem-
bers of Local 705, so the district court properly dismissed the
§ 510 claim against the other defendants.
As to RTS, the § 510 claim fails for a different reason. The
complaint alleges that RTS discharged the employees because
it lost its contract to perform the work at Corwith, not for the
purpose of interfering with their attainment of pension
benefits.
Finally, the conspiracy claim was properly dismissed
because ERISA does not provide a cause of action for conspir-
acy. To the extent that the claim is premised on Illinois com-
mon law of conspiracy, it is preempted. See id.
§§ 1132(a), 1144(a).
4 No. 11-3705
I. Background
This case comes to us on appeal from a Rule 12(b)(6)
dismissal, so we take the following facts from the amended
complaint. The Railroad owns Corwith Yard in Chicago and
until 2000 operated it through a subsidiary.1 In May 2000 the
Railroad contracted with RTS to operate Corwith. As an
independent contractor, RTS used its own employees to
perform the work at the rail yard.2
Teamsters Local 705 represented the RTS employees who
worked at Corwith. In fact, Local 705 had been the labor
representative for the employees at Corwith for more than
60 years. Local 705 members were eligible to participate in the
union’s pension plan. Participants who attained 25 years or
more of service were eligible for a full service pension, which
(unlike early pensions) paid “unreduced pension benefits
calculated at the highest rate and with no reduction for age.”
In other words, the more years of service a participant had, the
higher his pension would be. We do not know much more
1
The Railroad defendants are Burlington Northern Santa Fe, LLC (f/k/a
Burlington Northern Santa Fe Corporation); BNSF Railway Company; Santa
Fe Terminal Services, Inc.; and Berkshire Hathaway, Inc. Santa Fe Terminal
Services, Inc., was a subsidiary of BNSF Railway and operated Corwith
Yard in Chicago until M ay 2000; it no longer exists. Berkshire Hathaway
owns these Burlington Northern affiliates.
2
In addition to RTS, the amended complaint names two companies
identified as RTS’s corporate parents: Rail M anagement Services, LLC, and
Carrix, Inc. We refer to the RTS defendants collectively as “RTS” unless the
context requires otherwise.
No. 11-3705 5
about the employee benefits plan except that the Railroad
made contributions to it as required by contract.
In 2010 the Railroad decided to stop outsourcing the work
at Corwith and move it in-house. Before making this change,
the Railroad demanded wage-and-benefits concessions from
Local 705 amounting to over $1 million. Local 705 agreed.
Despite these concessions, however, when the Railroad
terminated its contract with RTS and took the Corwith work
in-house, it entered into a labor agreement with TCIU. This
agreement contained lower wage scales and a 401(k) retire-
ment plan instead of a pension, and the Railroad was not
obligated to make contributions to the employees’ 401(k)
accounts.
In October 2010 RTS informed Local 705 and the Corwith
employees that it was losing its contract to provide services at
Corwith and the employees would be laid off at the end of the
year. RTS explained that the employees could apply to work
for the Railroad, but they would lose the seniority they had
acquired at RTS and their wages and benefits under the labor
agreement between the Railroad and TCIU were likely to be
less generous than they were under RTS’s agreement with the
Teamsters.
Local 705 and six individual union members filed this
proposed class action against the Railroad, RTS, and TCIU,
alleging claims under § 510 and § 511 of ERISA and also
asserting a claim for civil conspiracy.3 The plaintiffs (we refer
3
The Railroad argues that Local 705 lacks standing, but our decision in
(continued...)
6 No. 11-3705
to them collectively as “Local 705”) quickly filed an amended
complaint, and the defendants moved to dismiss it for failure
to state a claim. See FED . R. CIV . P. 12(b)(6). The district court
granted the motion and dismissed all claims against all
defendants. The court swiftly dispatched the claim under § 511
of ERISA; that section allows for criminal penalties, not a
private civil cause of action. See 29 U.S.C. § 1141 (making it a
crime to use fraud, force, threats, or violence to restrain, coerce,
intimidate a participant or beneficiary of an employee benefits
plan).
Turning to the § 510 claim, the court noted that neither the
Railroad nor TCIU had an employment relationship with the
Corwith employees, so they could not be liable for unlawfully
discharging them in violation of the statute. See id. § 1140
(making it unlawful to “discharge … a participant” of an
employee benefits plan “for the purpose of interfering with the
attainment” of benefits under the plan). As for RTS, the
employer, the court held that the § 510 claim failed because the
amended complaint alleged that RTS discharged the Corwith
employees because it lost its contract with the Railroad, not for
the purpose of preventing them from attaining pension
benefits. Finally, the court dismissed the conspiracy claim
because ERISA does not provide for a cause of action for
3
(...continued)
Southern Illinois Carpenters Welfare Fund v. Carpenters Welfare Fund of Illinois,
326 F.3d 919, 921–22 (7th Cir. 2003), forecloses that argument. In any event,
the individual plaintiffs have standing, and “[w]here at least one plaintiff
has standing, jurisdiction is secure and the court will adjudicate the case
whether the additional plaintiffs have standing or not.” Ezell v. City of
Chicago, 651 F.3d 684, 696 n.7 (7th Cir. 2011).
No. 11-3705 7
conspiracy and preempts any conspiracy claim rooted in state
law. Alternatively, the court held that the amended complaint
did not plead sufficient facts to plausibly allege the existence of
a conspiracy.4
Local 705 timely appealed.
II. Discussion
We review the district court’s Rule 12(b)(6) dismissal order
de novo, accepting the allegations in the amended complaint
as true and drawing reasonable inferences in favor of the
plaintiffs. See Larson v. United Healthcare Ins. Co., 723 F.3d 905,
908 (7th Cir. 2013). Local 705 challenges only the dismissal of
its claim under § 510 of ERISA and the related claim for civil
conspiracy. We begin with the conspiracy claim, then move to
the § 510 claim for unlawful interference with the attainment
of retirement benefits.
4
Regarding the corporate parents and affiliates of RTS and BNSF Railway
(Berkshire Hathaway, Burlington N orthern Santa Fe, Santa Fe Terminal
Services, Rail M anagement Services, and Carrix), the court also held, as an
independent ground for dismissal, that the amended complaint failed to
allege any specific wrongdoing by them. See Cent. States, Se. & Sw. Areas
Pension Fund v. Reimer Express World Corp., 230 F.3d 934, 944 (7th Cir. 2000)
(explaining that parent corporations and their subsidiaries are “separate
entities and the acts of one cannot be attributed to the other”). Local 705
does not mount a serious challenge to this ruling on appeal.
8 No. 11-3705
A. Conspiracy to Interfere with the Attainment of Benefits
Protected by ERISA
The amended complaint alleges that the defendants
conspired to interfere with the Corwith employees’ attainment
of benefits under the Teamsters’ pension plan. It does not
specify the legal source of this claim. Local 705 urges us to
recognize a federal cause of action for conspiracy to violate
§ 510 of ERISA. We reject this argument for several reasons.
First, ERISA does not contain an express cause of action for
conspiracy to violate § 510. Section 510 makes it unlawful to
take certain adverse actions against the participants in an
employee benefits plan for the purpose of interfering with their
attainment of benefits under the plan. 29 U.S.C. § 1140. But the
statute nowhere mentions conspiracies or unlawful agreements
to interfere with the attainment of benefits. See id. Section
502(a) of ERISA provides a civil cause of action for the private
enforcement of rights protected by § 510, see id. § 1132(a)(3); see
also Tolle v. Carroll Touch, Inc., 977 F.2d 1129, 1133 (7th Cir.
1992), but it, too, lacks any reference to a cause of action for
conspiracy. ERISA is simply silent on the subject.
It is canonical that “[t]he express provision of one method
of enforcing a substantive rule suggests that Congress intended
to preclude others.” Alexander v. Sandoval, 532 U.S. 275, 290
(2001); see also Nw. Airlines, Inc. v. Transp. Workers Union, 451
U.S. 77, 94 n.30 (1981) (“ ‘A frequently stated principle of
statutory construction is that when legislation expressly
provides a particular remedy or remedies, courts should not
expand the coverage of the statute to subsume other reme-
dies.’ ” (quoting Nat’l R.R. Passenger Corp. v. Nat’l Ass’n of R.R.
No. 11-3705 9
Passengers, 414 U.S. 453, 458 (1974))). The Supreme Court has
held that this presumption applies with extra force in the
context of ERISA, which provides a comprehensive and
integrated enforcement scheme. See Mass. Mut. Life Ins. Co. v.
Russell, 473 U.S. 134, 146–48 (1985). Time and again the Court
has cautioned that ERISA offers little room for implied causes
of action or remedies, recognizing that the statute’s enforce-
ment scheme was the product of detailed study and a careful
balancing of competing interests. See Great-W. Life & Annuity
Ins. Co. v. Knudson, 534 U.S. 204, 209–10 (2002); Hughes Aircraft
Co. v. Jacobson, 525 U.S. 432, 447 (1999); Mertens v. Hewitt
Assocs., 508 U.S. 248, 254, 262–63 (1993); Pilot Life Ins. Co. v.
Dedeaux, 481 U.S. 41, 54 (1987); Russell, 473 U.S. at 146–48.
Accordingly, there is no basis for recognizing an implied
cause of action for conspiracy to violate § 510. ERISA’s compre-
hensive enforcement scheme already safeguards against
interference with the attainment of benefits by providing a civil
cause of action for the private enforcement of the substantive
rights conferred by § 510.
Moreover, although the Supreme Court has endorsed the
court’s authority to develop a federal common law pertaining
to the rights and obligations protected by ERISA, see Firestone
Tire & Rubber Co. v. Bruch, 489 U.S. 101, 110 (1989); Pilot Life,
481 U.S. at 56, this “power … to create a substantive federal
common law of contracts and trusts” is distinct from the “far
more circumscribed power to augment ERISA’s remedial
provisions,” Pappas v. Buck Consultants, Inc., 923 F.2d 531, 541
(7th Cir. 1991); see also Buckley Dement, Inc. v. Travelers Plan
Adm’rs of Ill., Inc., 39 F.3d 784, 789–90 (7th Cir. 1994). Our
10 No. 11-3705
“authority … to develop a ‘federal common law’ … is not the
authority to revise the text of the statute.” Mertens, 508 U.S. at
259.
For instance, we have previously declined to use this
limited common-law authority to extend liability to persons
beyond ERISA’s explicit reach—namely, nonfiduciary profes-
sionals who assist plan administrators in complying with
reporting requirements. See Pappas, 923 F.2d at 541. Similarly
here, extending the reach of ERISA to cover conspiracies to
violate § 510 would effectively revise the text of the statute and
augment ERISA’s remedial provisions; as such, it would be an
improper use of our limited authority to develop a federal
common law under ERISA.
Local 705 relies on the Ninth Circuit’s opinion in
Inter-Modal Rail Employees Ass’n v. Atchison, Topeka & Santa Fe
Railway, 80 F.3d 348 (9th Cir. 1996), vacated, 520 U.S. 510 (1997),
but that decision did not go so far as to explicitly recognize a
cause of action for conspiracy to violate § 510. The facts of
Inter-Modal are the opposite of the facts here: The plaintiffs lost
their jobs when a railroad company ceased using a subsidiary
and outsourced its work to an independent contractor. 80 F.3d
at 349–50. The plaintiffs sued the railroad company, its subsid-
iary, and the independent contractor for (among other claims)
conspiracy to interfere with their attainment of ERISA benefits
in violation of § 510. Id. at 350.
In a terse footnote at the beginning of its opinion, the Ninth
Circuit rejected the outside contractor’s argument that § 510
“does not support a cause of action against a non-employer for
conspiring with an employer to interfere with ERISA-protected
No. 11-3705 11
benefits.” See id. at 350 n.5. The court analogized to its earlier
opinion in Tingey v. Pixley-Richards West, Inc., which had held
that “an insurer who coerces an employer to fire an employee
must be covered by [§ 510’s] language.” 953 F.2d 1124, 1132 n.4
(9th Cir. 1992). The holding in Tingey was based on the panel’s
observation that § 510‘s prohibitions apply to “any person,”
not just employers. Id. Relying on this passage in Tingey, the
court in Inter-Modal found “no basis for distinguishing a
coercive insurer from a successor … who conspires with an
employer to interfere with ERISA-protected rights.” 80 F.3d at350 n.5.
This cursory discussion in a single footnote cannot be
understood as a formal ruling recognizing an implied statutory
cause of action for conspiracy to violate § 510. The Ninth
Circuit never meaningfully addressed the statutory text, the
presumption against implied statutory causes of action, or the
limits of the court’s power to develop federal common law in
the context of ERISA. We also question whether Tingey—the
Ninth Circuit precedent cited in the Inter-Modal footnote—
would support the extraordinary step of recognizing an
implied conspiracy cause of action under ERISA. Indeed,
Tingey makes no mention of conspiracy allegations at all. In
short, Local 705 reads the Inter-Modal footnote for much more
than it’s worth. The case does not support recognizing a
conspiracy cause of action here.
Moreover, where ERISA omits a cause of action for conspir-
acy to interfere with employee benefits, Illinois law cannot fill
the void. Subject to a few inapplicable exceptions, ERISA
§ 514(a) preempts all state laws that “relate to any employee
12 No. 11-3705
benefit[s] plan.” 29 U.S.C. § 1144(a). Locating the boundaries of
this very broad preemption language has sometimes been
difficult, see N.Y. State Conference of Blue Cross & Blue Shield
Plans v. Travelers Ins. Co., 514 U.S. 645, 655 (1995); Trs. of the
AFTRA Health Fund v. Biondi, 303 F.3d 765, 773 (7th Cir. 2002),
but the preemption question here is fairly straightforward. The
Supreme Court has held that Congress intended ERISA’s
comprehensive civil enforcement scheme to be exclusive. See,
e.g., Aetna Health Inc. v. Davila, 542 U.S. 200, 209 (2004); Pilot
Life, 481 U.S. at 54–56. As such, “any state-law cause of action
that duplicates, supplements, or supplants the ERISA civil
enforcement remedy conflicts with the clear congressional
intent to make the ERISA remedy exclusive and is therefore
pre-empted.” Davila, 542 U.S. at 209.
Thus, on its own, the civil enforcement scheme in § 502(a)
has “extraordinary pre-emptive power” that extends to
ordinary common-law causes of action. Id. (quoting Metro. Life
Ins. Co. v. Taylor, 481 U.S. 58, 65 (1987)); see also Ingersoll-Rand
Co. v. McClendon, 498 U.S. 133, 143–45 (1990). Section 502(a)’s
uniform enforcement scheme “induc[es] employers to offer
benefits by assuring a predictable set of liabilities, under
uniform standards of primary conduct and a uniform regime
of ultimate remedial orders and awards when a violation has
occurred.” See Rush Prudential HMO, Inc. v. Moran, 536 U.S.
355, 379 (2002). It “represents a careful balancing of the need
for prompt and fair claims settlement procedures against the
public interest in encouraging the formation of employee
benefit plans.” Pilot Life, 481 U.S. at 54. As the Supreme Court
has observed, “[t]he policy choices reflected in the inclusion of
certain remedies and the exclusion of others under the federal
No. 11-3705 13
scheme would be completely undermined if ERISA-plan
participants and beneficiaries were free to obtain remedies
under state law that Congress rejected in ERISA.” Id.
Accordingly, the district court’s decision to dismiss the
conspiracy claim was correct on several grounds. First, ERISA
does not provide an express cause of action for conspiracy to
interfere with the attainment of benefits in violation of § 510.
Second, it would be improper for us to recognize an implied
claim for conspiracy to violate § 510 or to adopt one under the
federal common law. And third, if the plaintiffs’ conspiracy
claim is premised on state law, it is preempted.
B. Section 510 Claim for Interference with Attainment of
Benefits
As relevant here, ERISA § 510 makes it “unlawful for any
person to discharge, fine, suspend, expel, discipline, or
discriminate against a participant [in an employee benefits
plan] … for the purpose of interfering with the attainment of
any right to which such participant may become entitled under
the plan.” 29 U.S.C. § 1140. A § 510 claim requires a showing of
specific intent to interfere with the participant’s attainment of
benefits. Nauman v. Abbott Labs., 669 F.3d 854, 857 (7th Cir.
2012). Actions that only incidentally affect the participant’s
benefits under a plan do not violate § 510. Isbell v. Allstate Ins.
Co., 418 F.3d 788, 796 (7th Cir. 2005). The intent to frustrate the
attainment of benefits must have been at least a motivating
factor for the adverse action against the plan participant;
whether but-for causation is required is a question we can
leave for another day. See Nauman, 669 F.3d at 857 & n.2.
14 No. 11-3705
The § 510 claim here is premised on allegations that the
Corwith employees were unlawfully discharged in violation of
the statute. The term “discharge” as used in § 510 presupposes
an employment relationship; only an employer can discharge
an employee. See Feinberg v. RM Acquisition, LLC, 629 F.3d 671,
675 (7th Cir. 2011) (recognizing that discharge is “what an
employer does to an employee”); Andes v. Ford Motor Co.,
70 F.3d 1332, 1337 (D.C. Cir. 1995) (recognizing “discharge” as
involving “employment termination”).
We are not saying that only employers can be liable for
violating § 510—although some of our opinions can be read to
suggest as much. See Andersen v. Chrysler Corp., 99 F.3d 846, 856
(7th Cir. 1996); McGath v. Auto-Body N. Shore, Inc., 7 F.3d 665,
668–69 (7th Cir. 1993); Deeming v. Am. Standard, Inc., 905 F.2d
1124, 1127 (7th Cir. 1990). As we have recently explained, this
language was dicta, and any assumption that only employers
can be liable under § 510 was ill founded. See Feinberg, 629 F.3d
at 675.
By its terms, § 510 does not condition liability on the
existence of an employment relationship. It restrains “any
person,” not just employers. See 29 U.S.C. § 1140; see also
Custer v. Pan Am. Life Ins. Co., 12 F.3d 410, 421 (4th Cir. 1993).
And “person” is defined as “an individual, partnership, joint
venture, corporation, mutual company, joint-stock company,
trust, estate, unincorporated organization, association, or
employee organization.” 29 U.S.C. § 1002(9). Because the
statute also separately defines “employer,” id. § 1002(5), “we
must assume that Congress used the [broader] term ‘person’
deliberately,” Custer, 12 F.3d at 421.
No. 11-3705 15
Moreover, the list of prohibited actions is not limited to
those capable of being performed by employers; nonemployers
can engage in at least some of the acts prohibited by § 510. See
Feinberg, 629 F.3d at 675; Custer, 12 F.3d at 421. For example,
§ 510 could apply to certain actions taken by unions. See Mattei
v. Mattei, 126 F.3d 794, 801 (6th Cir. 1997). A union is a
“person” as defined by § 1002(9), and “two of the words used
to describe illegal conduct [in § 510], ‘fine’ and ‘expel,’
are … commonly used in connection with actions of a union
against a member.” Id. And both employers and nonemployers
can discriminate against plan participants and beneficiaries in
a manner that violates § 510. See id. at 805–06; Custer, 12 F.3d at
421.
Here, however, the § 510 claim rests entirely on allegations
of unlawful discharge. The amended complaint does not allege
that the defendants fined, suspended, expelled, disciplined, or
discriminated against the plaintiffs. Accordingly, the claim
cannot go forward against the Railroad or TCIU, neither of
which had an employment relationship with the Corwith
employees.
On the other hand, RTS employed the laborers at Corwith,
but here the plaintiffs’ allegations are insufficient in a different
respect. The amended complaint alleges that RTS laid off its
work force at Corwith because the Railroad ceased outsourcing
the work at the rail yard to it. Without a contract to perform
the work, RTS no longer had any need to employ the union’s
members at Corwith; as a consequence of losing its contract
with the Railroad, the company discharged its Corwith
employees. The amended complaint does not allege that RTS’s
16 No. 11-3705
discharge decision was motivated by a specific intent to
frustrate the employees’ attainment of pension benefits. Nor
are there sufficient factual allegations to support a reasonable
inference the RTS acted with that intent. Accordingly, the § 510
claim fails against all the defendants.
For the foregoing reasons, the district court properly
dismissed the amended complaint for failure to state a claim.
AFFIRMED.