United States District Court, D. New Jersey
WILLIAM J. MARTINI, U.S.D.J.
Pension Benefit Guaranty Corporation (“PBGC”) is
a government agency that administers pension plan termination
insurance under Title IV of the Employee Retirement Income
Security Act (ERISA). As trustee of the United Tool &
Stamping Pension Plan (“the Plan”), PBGC alleges
that UTS-NC breached its Reorganization Agreement with UTS-NJ
by discontinuing payments to the Plan in 2008. Now before the
Court is Defendant UTS-NC's motion to dismiss the
complaint pursuant to Federal Rule of Civil Procedure
12(b)(6) for failure to state a claim upon which relief may
be granted. No oral arguments were held. See Fed. R.
Civ. P. 78(b). For the following reasons, the motion to
dismiss is DENIED.
1996, United Tool & Stamping split into two separate
companies, UTS-NJ and UTS-NC, as a result of
“irreconcilable differences” between its owners.
In relevant part, the Reorganization Agreement stated that
UTS-NJ and UTS-NC agreed to each pay one half of future
contributions to the already existing United Tool &
Stamping Company Pension Plan (the “Plan”).
Specifically, UTS-NC agreed “to make its annual
contribution to New Jersey of one-half of the annual amount
payable by New Jersey by no later than July 1 of each
year.” Compl. Ex. 1, p. 5. Other cost-sharing
provisions pertained to potential environmental cleanup costs
and future tax liability. Both parties made contributions to
the Plan as agreed until 2008, when, for reasons unknown to
the Court, all contributions ceased. Compl. ¶ 35. Six
years later, on February 27, 2014, UTS-NJ filed for Chapter 7
bankruptcy. Id. at ¶ 25.
PBGC is an entity within the Department of Labor that
administers pension plan termination insurance under Title IV
of ERISA. See 29 U.S.C. § 1302. ERISA and the
Internal Revenue Code (IRC) require that plan sponsors pay
minimum annual contributions to the plan. See 29
U.S.C. §§ 412, 430. PBGC must terminate a pension
plan if it determines that the plan's assets are
insufficient to pay benefits currently due. 29 U.S.C. §
1342(a); Pl.'s Memo. Opp. 6. When an underfunded pension
plan terminates, PBGC becomes trustee of the plan and
supplements any assets remaining in the plan with its
insurance funds, in order to ensure that participants receive
their benefits as required by statute. See generally
29 U.S.C. § 1344. As statutory trustee of the plan, PBGC
has authority “to collect for the plan any amounts due
the plan, ” and to “commence, prosecute, or
defend on behalf of the plan any suit or proceeding involving
the plan.” See 29 U.S.C. §
1342(d)(1)(B)(ii), (iv). The statute thus empowers PBGC to
enforce a plan's contractual terms.
6, 2014, PBGC and UTS-NJ agreed to terminate the Plan
retroactively as of August 1, 2013, and to appoint PBGC as
trustee. Compl. ¶ 26. PBGC estimated that unpaid annual
contributions amounted to $1, 342, 604. Id. at
¶ 27. Of this amount, PBGC received $198, 072.59 from
UTS-NJ's bankruptcy estate. Id. at ¶ 28.
Because of the shortfall, PBGC is paying participants using
the agency's insurance funds. The agency brought this
suit on June 2, 2017, alleging that UTS-NC breached the
Reorganization Agreement by discontinuing payments in 2008.
Its success would require the Court to find that PBGC was an
intended third-party beneficiary of the Agreement, with
contractual standing to sue under its terms. On July 27,
2017, Defendant UTS-NC moved under Rule 12(b)(6) to dismiss
the complaint for failure to state a claim upon which relief
may granted. ECF No. 16.
Rule of Civil Procedure 12(b)(6) provides for the dismissal
of a complaint, in whole or in part, if the plaintiff fails
to state a claim upon which relief can be granted. The moving
party bears the burden of showing that no claim has been
stated. Hedges v. United States, 404 F.3d 744, 750
(3d Cir. 2005). In deciding a motion to dismiss under Rule
12(b)(6), a court must take all allegations in the complaint
as true and view them in the light most favorable to the
plaintiff. See Warth v. Seldin, 422 U.S. 490, 501
(1975); Trump Hotels & Casino Resorts, Inc. v. Mirage
Resorts Inc., 140 F.3d 478, 483 (3d Cir. 1998).
a complaint need not contain detailed factual allegations,
“a plaintiff's obligation to provide the
‘grounds' of his ‘entitlement to relief'
requires more than labels and conclusions, and a formulaic
recitation of the elements of a cause of action will not
do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544,
555 (2007). Thus, the factual allegations must be sufficient
to raise a plaintiff's right to relief above a
speculative level, such that it is “plausible on its
face.” See Id. at 570; see also Umland v.
PLANCO Fin. Serv., Inc., 542 F.3d 59, 64 (3d Cir. 2008).
A claim has “facial plausibility when the plaintiff
pleads factual content that allows the court to draw the
reasonable inference that the defendant is liable for the
misconduct alleged.” Ashcroft v. Iqbal, 129
S.Ct. 1937, 1949 (2009) (citing Twombly, 550 U.S. at
556). While “[t]he plausibility standard is not akin to
a ‘probability requirement' . . . it asks for more
than a sheer possibility.” Iqbal, 129 S.Ct. at
of action for breach of contract requires showing (1) a
contract; (2) a breach of the contract; (3) damages flowing
from the contract; and (4) the suing party performed its own
contractual duties. Video Pipeline, Inc. v. Buena Vista
Home Entm't, Inc., 210 F.Supp.2d 552, 561 (D.N.J.
2002)(citations omitted). An exception to the fourth
requirement exists where the contracting parties intended to
benefit a third party. In that case, there are no obligations
for the third party to perform, yet the intent of the
contracting parties imbues the third party with the right to
enforce the terms of contract. IMS Health Info. Solutions
USA v. Lempernesse, 2016 WL 236214, *5-6 (D.N.J. Jan.
19, 2016). Here, BPGC asserts that it was an intended
third-party beneficiary of the Reorganization Agreement
between UTS-NJ and UTS-NC.
UTS-NC offers several grounds for dismissal. First, it denies
that PBGC was an intended beneficiary of the Reorganization
Agreement between UTS-NJ and UTS-NC. As a result, the
argument goes, PBGC has no right (or “standing”)
to enforce the terms of the contract. Second, Defendant
argues that UTS-NC was only bound to continue contributions
to the Plan so long as UTS-NJ continued its equal share of
the contributions. Because UTS-NJ also stopped contributing
in 2008, UTS-NC argues that its own performance was excused
and that it did not breach the Agreement. These arguments are
unavailing for the following reasons.
PBGC as a Third-Party Beneficiary of the Reorganization
party may enforce a contract if the contracting parties
intended so. See Kersey v. Becton Dickinson &
Co., 2011 WL 2516162, *3 (3d. Cir. 2011)(citing
Broadway Maint. Corp. v. Rutgers, State Univ., 447
A.2d 906, 909 (N.J. 1982)(“The principle that
determines the existence of a third party beneficiary status
focuses on whether the parties to the contract intended
others to benefit from the existence of the contract, or
whether the benefit so derived arises merely as an unintended
incident of the agreement.”). Some contracts expressly
designate a third party as an intended beneficiary. Other
times, the provisions of a contract and extrinsic
circumstances imply an intent to create enforceable
third-party rights, even if that intent is not made explicit.
See Consult Urban Renewal Dev. Corp. v. T.R. ...