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IUE PENSION FUND v. LOCKE MACH. CO.

November 29, 1989

Re: IUE AFL-CIO Pension Fund, et al.
v.
Locke Machine Company, a Division of U.S. Components Corp., et al.



The opinion of the court was delivered by: LECHNER, JR.

 ALFRED J. LECHNER, JR., UNITED STATES DISTRICT JUDGE

 Plaintiffs, the IUE AFL-CIO Pension Fund (the "Fund") and individually named trustees of the Fund (collectively the "plaintiffs"), bring this action against the defendants, the Locke Machine Company ("Locke Machine") and individually named shareholders and officers of Locke Machine (collectively the "defendants"), for withdrawal liability pursuant to section 4219(c)(5) of the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended 29 U.S.C. § 1001 et seq. Presently before the court are the motions of the defendants to dismiss the Complaint for lack of personal jurisdiction pursuant to Fed.R.Civ.P. 12(b)(2), and for failure to state a claim pursuant to Fed.R.Civ.P. 12(b)(6).

 Facts

 The Fund is an employee pension benefit plan within the meaning of section 3(2) of ERISA, 29 U.S.C. § 1002(2)(A). The individually named plaintiffs are trustees of the Fund and are fiduciaries within the meaning of section 3(21)(A) of ERISA, id. § 1002(21)(A). The Fund provides retirement and related benefits to eligible participants and beneficiaries. Richman Aff., *fn1" para. 3. It maintains its sole office in Bloomfield, New Jersey, from which it administers the IUE AFL-CIO Pension Plan (the "Plan"). Id.

 Locke Machine was a Michigan corporation which engaged in the manufacture of machine parts at its facility in Ohio. Immonen Aff., paras. 1-2. Pursuant to a series of collective bargaining agreements *fn2" with Local Union No. 687 of the International Union of Electrical, Radio and Machine Workers, AFL-CIO-CLC (the "Union"), Locke Machine was required to make monthly payments to the Plan from 1 January 1973 to 30 September 1986. Richman Aff., paras. 4-5.

 It appears the only contacts of Locke Machine with New Jersey, prior to the initiation of this action, were the periodic mailing of checks for contributions to the Fund and occasional correspondence with representatives of the Fund regarding liability for contributions. Immonen Aff., para. 5. Over half the production of Locke Machine was sold to Bendix Automotive, which had fabricating plants in North Carolina and Michigan; the remainder of production was sold to customers in the Midwest and South. Id., para. 3. Locke Machine never conducted business in the state of New Jersey. Id., para. 4. It was neither authorized to do business nor maintained any office or representative in New Jersey. Id. No customers of Locke Machine were located in New Jersey, although it may have occasionally received bid solicitations from businesses in this state. Id., para. 3

 On 30 September 1986, Locke Machine terminated its operations and proceeded to sell substantially all of its operating assets. Richman Aff., para. 5. The proceeds of the sale were distributed to the shareholders pursuant to a vote of the board of directors of Locke Machine. Complaint, para. 39.

 Also on 30 September 1986, Locke Machine ceased all covered operations under the Plan. Id. By letter, dated 26 December 1986, the Fund demanded that Locke Machine begin payments of withdrawal liability on the Plan pursuant to ERISA section 4211(c)(4), 29 U.S.C. § 1391(c)(4). Richman Aff., para. 5 & Exhibit 1. The Fund stated it had determined Locke Machine's withdrawal liability to be $ 258,066. Id. Payment was to be made under a schedule of quarterly installments beginning around 1 March 1987. Id.

 Locke Machine made the first seven installment payments but failed to make the eighth payment due on 1 December 1988. Id., para. 6 & Exhibit 2. By letter, dated 8 December 1988, the Fund demanded continuation of payment and notified Locke Machine that it would be in default if the eighth payment were not made within sixty days of the due date. Id. Locke Machine apparently did not comply with the demand. Complaint, para. 31.

 On 3 May 1989, the Fund filed a six-count Complaint in this district claiming Locke Machine and the individually named defendants are jointly and severally liable for the balance of the withdrawal liability payment. The first cause of action articulated in the Complaint asserts Locke Machine *fn3" is obligated to pay the remainder of its withdrawal liability, alleged to be $ 148,360.39, plus accrued interest, liquidated damages and attorneys' fees under section 4219(c)(5) of ERISA, 29 U.S.C. § 1399(c)(5). Complaint, paras. 19-20, 33-34.

 The second cause of action alleges the president, David J. Immonen ("Immonen"), and the board of directors *fn4" of Locke Machine knew of the withdrawal liability prior to authorizing the sale of assets and distribution of the proceeds of the sale to the Locke Machine shareholders. Id., para. 2-40. The Fund alleges the distribution of the proceeds constituted a transaction to evade and avoid withdrawal liability within the meaning of ERISA section 4212(c), 29 U.S.C. § 1392(c). Id., para. 40. Therefore, the Fund claims the shareholders are jointly and severally liable with Locke Machine for the remainder of the withdrawal liability. Id., para. 41. The remaining four causes of action asserted in the Complaint are under the laws of the state of Michigan, where Locke Machine was incorporated.

 All the individual defendants were former officers, directors and/or shareholders of Locke Machine. Immonen, a Pennsylvania resident, was the president, the majority shareholder and a director of Locke Machine. Immonen Aff., para. 2. Defendant Glyn H. Jones ("Jones"), an Ohio resident, was the vice president and secretary as well as a shareholder and director of Locke Machine. Jones Aff., para. 2.

 At least one defendant, Ray York ("York"), was neither an officer nor a director of Locke Machine. *fn5" York Aff., para. 2. An Ohio resident, York had no involvement with Locke Machine other than as a passive shareholder of ten shares of Locke Machine stock. Id. York received $ 25.90 upon the dissolution of Locke Machine in December 1986. Id., para. 2.

 York has no personal contacts with New Jersey. Id., paras. 4-5. Similarly, neither Immonen nor Jones has personal contacts with New Jersey beyond any official involvement they may have had as officers or directors of Locke Machine. Immonen Aff., paras. 6-8; Jones Aff., paras. 4-6. The Fund admits that none of the defendants who have responded to the Complaint are residents of New Jersey. Richman Aff., para. 9.

 At oral argument, counsel for all parties indicated that a majority of the defendants have settled with the Fund or were dismissed. At this point, the only remaining defendants are Locke Machine, Immonen, Jones and Mary Macauley Whiting ("Whiting"), a Michigan resident who received several thousand dollars upon the distribution of Locke Machine's assets. The record contains no further reference to Whiting. York settled with the Fund.

 The plaintiffs served process on the individual defendants at their places of residence. Id., para. 7. Locke Machine was served at the office of its attorney, Mark T. Vuono, who accepted service. *fn6" The Fund contends service on all the defendants was made under ERISA's nationwide service of process provision, ERISA section 4301(d), 29 U.S.C. § 1451(d), and Fed.R.Civ.P. 4(c)(2)(C)(ii). Id.

 Jurisdiction over the Fund's ERISA claims is founded on 29 U.S.C. § 1451(c). The Fund asserts this court has pendent jurisdiction over the state causes of action it alleges arise under Michigan law. Complaint, para. 6. In addition, the Fund claims venue in this district is proper under 29 U.S.C. § 1451(d) because the Fund is administered here.

 Discussion

 The threshold issue in this matter is whether this court has personal jurisdiction over the defendants. The plaintiffs argue there is no question as to personal jurisdiction, because the defendants were all served pursuant to the ERISA provision for nationwide service of process. Fund Opp.Mem. at 11. The defendants do not contest the viability of the ERISA provision for service of process. They argue, however, that they are not "employers" for purposes of actions to collect withdrawal liability under ERISA and, therefore, the plaintiffs cannot rely on the ERISA service of process provision to establish personal jurisdiction. Def.Reply Mem. at 2-4. Moreover, due to the fact that they do not have minimum contacts with this forum, the individual defendants argue the state law claims must be dismissed. Def.Mem. at 14-15.

 I. Personal Jurisdiction

 Ordinarily, a federal court has jurisdiction over the defendant in a civil action only to the extent the law of the state in which that court sits permits the exercise of such jurisdiction. Fed.R.Civ.P. 4(e); Provident Nat'l Bank v. Federal Sav. & Loan Ass'n, 819 F.2d 434, 436 (3d Cir. 1987); Eason v. Linden Avionics, 706 F. Supp. 311, 319 (D.N.J. 1989). However, the Federal Rules of Civil Procedure provide:

 
Whenever a statute of the United States . . . provides for service of a summons upon a party not an inhabitant of or found within the state in which the district court is held, service may be made under the circumstances and in the manner prescribed by the statute . . . .

 Fed.R.Civ.P. 4(e). It is only in "'the absence of a federal statute authorizing nationwide service of process'" that a court must look to state law to determine the existence of personal jurisdiction. Dent v. Cunningham, 786 F.2d 173, 175 (3d Cir. 1986) (quoting Max Daetwyler Corp. v. R. Meyer, 762 F.2d 290, 295 (3d Cir.), cert. denied, 474 U.S. 980, 88 L. Ed. 2d 336, 106 S. Ct. 383 (1985)).

 A. ERISA Nationwide Service of Process

 Section 4301(d) of ERISA contains specific provisions authorizing nationwide service of process in actions for withdrawal liability:

 
An action under this section may be brought in the district where the plan is administered or where a defendant resides or does business, and process may be served in any district where a ...

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