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D.D.C.,2010.
Board of Trustees of Unite Here Local 25 v. MR Watergate LLC
677 F.Supp.2d 229, 187 L.R.R.M. (BNA) 3108, 48 Employee Benefits Cas. 2368
United States District Court,
District of Columbia.
BOARD OF TRUSTEES OF UNITE HERE LOCAL 25 and Hotel Association of Washington, D.C. Pension Fund,
Plaintiff,
v.
MR WATERGATE LLC, et al., Defendants.
Civil Action No. 09-1760 (ESH).
Jan. 6, 2010.
Background: Board of trustees for multiemployer pension fund brought action under Employee Retirement Income
Security Act (ERISA) against employer and purchaser of property on which work had been done to collect pension
231Hk516 Withdrawal or Termination Liability
231Hk518 k. Predecessor or successor liability in general. Most Cited Cases
When employer who is subject to withdrawal liability to multiemployer pension fund under ERISA sells its assets to
another corporation, common law rule is that purchasing corporation does not assume seller corporation's liabilities,
231HVII Pension and Benefit Plans
231HVII(D) Contributions and Funding
231Hk516 Withdrawal or Termination Liability
231Hk518 k. Predecessor or successor liability in general. Most Cited Cases
equipment, and methods of production, and (9) whether he produces same products. Employee Retirement Income
Security Act of 1974, §§ 502(a)(3), 515, 4201 et seq., 29 U.S.C.A. §§ 1132(a)(3), 1145, 1381 et seq.
231Hk516 Withdrawal or Termination Liability
231Hk518 k. Predecessor or successor liability in general. Most Cited Cases
Lender that acquired hotel in foreclosure sale after borrower defaulted was not borrower's successor in interest, and
thus was not subject to successor liability under ERISA for borrower's withdrawal liability to multiemployer pension
MEMORANDUM OPINION
ELLEN SEGAL HUVELLE, District Judge.
BACKGROUND
In 2004 the Employer obtained a loan from PB Capital to purchase the famous Watergate Hotel (the “Hotel”) in
Washington, D.C. (Compl. ¶ 21.) The Employer entered into a collective bargaining agreement with Unite Here
and that PB Capital was instituting foreclosure proceedings. (Id. ¶ 21.) On July 21, 2009, PB Capital purchased the
Hotel at the foreclosure sale. (Id. ¶ 22.) After learning about the foreclosure proceedings, the Fund determined that
the Employer had completely withdrawn and thus owed the Fund $637,855.85 in withdrawal liability. (Id. ¶ 24.) The
Fund notified the Employer of this decision and indicated that it would accept payments in quarterly installments of
48-51.)
FN1. As described in the complaint, “the Fund is an ‘employee benefit plan’ as defined in Section 3(3) of
[the Employee Retirement Income Security Act] ERISA, 29 U.S.C. § 1002(3).” (Compl. ¶ 4.)
The Fund brings this action under Sections 502(a)(3) and 515 of ERISA, as amended, 29 U.S.C. §§ 1132(a)(3) and
1145, and the Multiemployer Pension Plan Amendments Act of 1980, 29 U.S.C. §§ 1381-1461, for collection of a
delinquent withdrawal liability. The Fund names PB Capital as a codefendant, alleging that PB Capital is the Em-
ployer's “successor in interest” and is, therefore, liable for the Employer's withdrawal liability under the successor-
ship doctrine. (Compl. ¶¶ 48-51.)
ANALYSIS
I. MOTION TO DISMISS STANDARD
As the Supreme Court recently held in Ashcroft v. Iqbal:
[A] complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on
its face.’ [ Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ]. A claim
has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable infer-
ence that the defendant is liable for the misconduct alleged. Id. at 556, 127 S.Ct. 1955. The plausibility standard is
not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted un-
lawfully. Id. Where a complaint pleads facts that are ‘merely consistent with’ a defendant's liability, it ‘stops short
of the line between possibility and plausibility of entitlement to relief.’ Id. at 557, 127 S.Ct. 1955.
--- U.S. ----, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009). Under this standard, dismissal is required if the com-
plaint consists only of “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory
statements.” Id. The allegations in plaintiff's complaint are presumed true at this stage and all reasonable factual
inferences must be construed in plaintiff's favor. Maljack Prod., Inc. v. Motion Picture Ass'n of Am., Inc., 52 F.3d
373, 375 (D.C.Cir.1995). However, “the court need not accept inferences drawn by plaintiffs if such inferences are
ployer can be subject to “withdrawal liability” in order to “ ‘relieve the funding burden on remaining employers' and
to ‘avoid creating a severe disincentive to new employers entering the plan.’ ” Upholsterers' Int'l Union Pension
Fund v. Artistic Furniture of Pontiac, 920 F.2d 1323, 1328 (7th Cir.1990) (quoting House Committee on Ways &
Means, Multiemployer Pension Plan Amendments Act of 1980, H.R.Rep. No. 96-869, Part I, at 67, 96th Cong., 2d
chased corporation under certain conditions. Id. at 1329 (internal citations omitted).
[2] The D.C. Circuit uses the following nine-part test to determine whether a purchaser of corporate assets is a suc-
cessor and should be subject to successor liability:
© 2010 Thomson Reuters. No Claim to Orig. US Gov. Works.
ing conditions, (8) whether he uses the same machinery, equipment and methods of production and (9) whether he
produces the same products.
See Sec'y of Labor, Mine Safety and Health Admin. v. Mullins, 888 F.2d 1448, 1453-54 (D.C.Cir.1989) (citing
in the nine-part test, factors (4)-(9) are not usually considered as distinct elements, but are instead relevant to deter-
mining whether the “substantial continuity of business operations” element has been met. See, e.g., Stotter, 991 F.2d
at 1001 (examining the successor's use of the same employees, equipment, products, and customers as factors in
determining whether there was a “substantial continuity of identity in the business enterprise before and after [the]
devoid of any factual basis, as it merely alleges that:
49. On or about July 21, 2009, PB Capital Corporation took control of the Hotel.
50. PB Capital Corporation is continuing the Employer's business operations, such as they were.
51. By virtue of its status as a successor in interest to the Employer, PB Capital Corporation is liable for the Em-
a cause of action.” Twombly, 550 U.S. at 555, 127 S.Ct. 1955.
Moreover, taking into account the facts as alleged in the complaint, the Fund cannot, as a matter of law, prove that
PB Capital is subject to successor liability. The facts establish that PB Capital, in its capacity as lender, foreclosed
disputed facts, the Fund cannot satisfy these factors. Thus, the Fund's allegations against PB Capital fail to state a
cause of action for successor liability, and, therefore, the claim against PB Capital must be dismissed.FN2
FN2. Under the nine-part test for successor liability in the D.C. Circuit, the other two factors to be consid-
ered-prior notice of the delinquency by the successor and the ability of the predecessor to satisfy the liabil-
Security Act of 1974, §§ 502(a)(3), 515, 4201 et seq., 29 U.S.C.A. §§ 1132(a)(3), 1145, 1381 et seq.
231Hk516 Withdrawal or Termination Liability
231Hk518 k. Predecessor or successor liability in general. Most Cited Cases
Lender that acquired hotel in foreclosure sale after borrower defaulted was not borrower's successor in interest, and
thus was not subject to successor liability under ERISA for borrower's withdrawal liability to multiemployer pension
MEMORANDUM OPINION
ELLEN SEGAL HUVELLE, District Judge.
BACKGROUND
In 2004 the Employer obtained a loan from PB Capital to purchase the famous Watergate Hotel (the “Hotel”) in
Washington, D.C. (Compl. ¶ 21.) The Employer entered into a collective bargaining agreement with Unite Here
and that PB Capital was instituting foreclosure proceedings. (Id. ¶ 21.) On July 21, 2009, PB Capital purchased the
Hotel at the foreclosure sale. (Id. ¶ 22.) After learning about the foreclosure proceedings, the Fund determined that
the Employer had completely withdrawn and thus owed the Fund $637,855.85 in withdrawal liability. (Id. ¶ 24.) The
Fund notified the Employer of this decision and indicated that it would accept payments in quarterly installments of
48-51.)
FN1. As described in the complaint, “the Fund is an ‘employee benefit plan’ as defined in Section 3(3) of
[the Employee Retirement Income Security Act] ERISA, 29 U.S.C. § 1002(3).” (Compl. ¶ 4.)
The Fund brings this action under Sections 502(a)(3) and 515 of ERISA, as amended, 29 U.S.C. §§ 1132(a)(3) and
1145, and the Multiemployer Pension Plan Amendments Act of 1980, 29 U.S.C. §§ 1381-1461, for collection of a
delinquent withdrawal liability. The Fund names PB Capital as a codefendant, alleging that PB Capital is the Em-
ployer's “successor in interest” and is, therefore, liable for the Employer's withdrawal liability under the successor-
ship doctrine. (Compl. ¶¶ 48-51.)
ANALYSIS
I. MOTION TO DISMISS STANDARD
As the Supreme Court recently held in Ashcroft v. Iqbal:
[A] complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on
its face.’ [ Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ]. A claim
has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable infer-
ence that the defendant is liable for the misconduct alleged. Id. at 556, 127 S.Ct. 1955. The plausibility standard is
not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted un-
lawfully. Id. Where a complaint pleads facts that are ‘merely consistent with’ a defendant's liability, it ‘stops short
of the line between possibility and plausibility of entitlement to relief.’ Id. at 557, 127 S.Ct. 1955.
--- U.S. ----, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009). Under this standard, dismissal is required if the com-
plaint consists only of “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory
statements.” Id. The allegations in plaintiff's complaint are presumed true at this stage and all reasonable factual
inferences must be construed in plaintiff's favor. Maljack Prod., Inc. v. Motion Picture Ass'n of Am., Inc., 52 F.3d
373, 375 (D.C.Cir.1995). However, “the court need not accept inferences drawn by plaintiffs if such inferences are
ployer can be subject to “withdrawal liability” in order to “ ‘relieve the funding burden on remaining employers' and
to ‘avoid creating a severe disincentive to new employers entering the plan.’ ” Upholsterers' Int'l Union Pension
Fund v. Artistic Furniture of Pontiac, 920 F.2d 1323, 1328 (7th Cir.1990) (quoting House Committee on Ways &
Means, Multiemployer Pension Plan Amendments Act of 1980, H.R.Rep. No. 96-869, Part I, at 67, 96th Cong., 2d
chased corporation under certain conditions. Id. at 1329 (internal citations omitted).
[2] The D.C. Circuit uses the following nine-part test to determine whether a purchaser of corporate assets is a suc-
cessor and should be subject to successor liability:
© 2010 Thomson Reuters. No Claim to Orig. US Gov. Works.
ing conditions, (8) whether he uses the same machinery, equipment and methods of production and (9) whether he
produces the same products.
See Sec'y of Labor, Mine Safety and Health Admin. v. Mullins, 888 F.2d 1448, 1453-54 (D.C.Cir.1989) (citing
in the nine-part test, factors (4)-(9) are not usually considered as distinct elements, but are instead relevant to deter-
mining whether the “substantial continuity of business operations” element has been met. See, e.g., Stotter, 991 F.2d
at 1001 (examining the successor's use of the same employees, equipment, products, and customers as factors in
determining whether there was a “substantial continuity of identity in the business enterprise before and after [the]
devoid of any factual basis, as it merely alleges that:
49. On or about July 21, 2009, PB Capital Corporation took control of the Hotel.
50. PB Capital Corporation is continuing the Employer's business operations, such as they were.
51. By virtue of its status as a successor in interest to the Employer, PB Capital Corporation is liable for the Em-
a cause of action.” Twombly, 550 U.S. at 555, 127 S.Ct. 1955.
Moreover, taking into account the facts as alleged in the complaint, the Fund cannot, as a matter of law, prove that
PB Capital is subject to successor liability. The facts establish that PB Capital, in its capacity as lender, foreclosed
disputed facts, the Fund cannot satisfy these factors. Thus, the Fund's allegations against PB Capital fail to state a
cause of action for successor liability, and, therefore, the claim against PB Capital must be dismissed.FN2
FN2. Under the nine-part test for successor liability in the D.C. Circuit, the other two factors to be consid-
ered-prior notice of the delinquency by the successor and the ability of the predecessor to satisfy the liabil-
