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Baldwin v. Credit Based Asset Servicing and Securitization: BANKRUPTCY | CIVIL PROCEEDURE - error not treating motion as 60(b)4); insufficent facts regarding notice; remandUnited States Court of Appeals
FOR THE EIGHTH CIRCUIT
Neil Hastings; Jennifer Karpiuk,
individually and on behalf of all
others similarly situated,
Gary L. Wilson; John H. Dasburg;
Steve Wilson; Douglas Steenland;
Richard H. Anderson; Terri L.
Keimig; Timothy J. Meginnes;
Daniel Matthews; Michael
Becker; Robert Brodin; Mickey P.
Foret; Hiram Cox; Thomas
Momchilov; James G. Mathews;
Bernard L. Han; Steve Miller;
Tom Goebel; Bill Johnston; Len
Willey; Rick Woolley; Jim
MacKenzie; Unknown Fiduciaries
Appeal from the United States
District Court for the
District of Minnesota.
Submitted: November 14, 2007
Filed: February 22, 2008
Before MURPHY, HANSEN and GRUENDER, Circuit Judges.
1The Honorable Richard H. Kyle, United States District Judge for the District
GRUENDER, Circuit Judge.
Neil Hastings and Jennifer Karpiuk were employees of Northwest Airlines, Inc.
(“NWA”). They brought a class action lawsuit against alleged fiduciaries of two
separate NWA pension plans claiming the defendants breached their fiduciary duties
under §§ 409 and 502(a)(2) of the Employment Retirement Income Security Act of
1974 (“ERISA”), 29 U.S.C. §§ 1109, 1132(a)(2). The district court1 dismissed the
action with respect to one of the pension plans, concluding that the Railway Labor
Act’s (“RLA”) mandatory arbitration provision, 45 U.S.C. § 184, divested federal
courts of subject matter jurisdiction. The district court also dismissed the action with
respect to the second pension plan for lack of standing because Hastings and Karpiuk
were not participants, beneficiaries or fiduciaries of that plan. We affirm.
In 1993, NWA and the International Association of the Mechanics and
Aerospace Workers (“IAM”) entered into a collective bargaining agreement (“IAM
Equity Agreement”). Under the IAM Equity Agreement, NWA employees who were
IAM union members received shares of NWA Series C Voting Convertible
Exchangeable Preferred Stock in consideration for wage concessions. Three other
NWA employee groups reached similar agreements: the Air Lines Pilots’ Association
International (“ALPA”), the International Brotherhood of Teamsters, and NWA
management. NWA placed the preferred stock into the Northwest Airlines
Corporation Employee Stock Plan (“Employee Plan”), a new profit-sharing plan. The
Employee Plan was divided into separate trust accounts for each of the four employee
As part of and simultaneous with the IAM Equity Agreement, NWA and IAM
entered into a trust agreement (“IAM Trust Agreement”). The IAM Trust Agreement
established the rules governing IAM’s separate trust in the Employee Plan, including
the powers and duties assigned to the IAM trustees. The IAM trustees are the named
fiduciaries who have the “authority to control and manage the operation and
administration of the plan.” 29 U.S.C. § 1102(a)(1). Both the IAM Equity Agreement
and the IAM Trust Agreement allowed the IAM to appoint and remove trustees;
however, such actions required NWA’s concurrence.
In 2002, the Employee Plan was terminated. IAM and NWA entered into a
merger agreement, pursuant to which the preferred stock was transferred from the
Employee Plan to a NWA-sponsored 401(k) Retirement Savings Plan for Contract
Employees (“IAM Plan”). The IAM Trust Agreement continued to apply, and the
IAM trustees retained their authority over the NWA preferred stock held in the IAM
The ALPA had a similar arrangement. Their preferred stock was transferred
to a NWA-sponsored 401(k) Retirement Savings Plan for Pilot Employees (“Pilot
Plan”). A Retirement Board consisting of two members selected by NWA and two
members selected by the ALPA served as trustees of the Pilot Plan.
According to the collective bargaining agreements, the NWA preferred stock
could not be sold on the open market. Rather, it had an exercisable put option. This
option required NWA to buy the preferred stock back at a fixed price of .96 per
share if the trustees exercised the put after June 1, 2003 and before August 2, 2003.
The IAM trustees timely exercised the put option, but NWA did not redeem the
shares. The trustees then obtained a court order requiring NWA to honor its
agreement. However, the IAM trustees accepted NWA common stock, in lieu of cash,
for the repurchase of the preferred stock. Hastings and Karpiuk assert that the Pilot
Plan also obtained NWA common stock through similar circumstances.
From January 1, 2001, to June 20, 2005, NWA suffered operating losses of .6
billion and its debt increased by billion. During this period, several NWA
executives, who Hastings and Karpiuk allege are fiduciaries to the pension plans, sold
their personal shares of NWA common stock. Nonetheless, the IAM Plan and the
Pilot Plan retained their shares of NWA common stock as the price of the stock fell.
On September 14, 2005, NWA filed for bankruptcy.
Hastings and Karpiuk were IAM members employed by NWA and were
participants in the IAM Plan. On April 28, 2006, Hastings and Karpiuk commenced
this class action lawsuit against certain NWA executives (“NWA Defendants”),
alleging that they were fiduciaries of both the IAM Plan and the Pilot Plan, and the
Pilot Plan Retirement Board (“Pilot Defendants”) as fiduciaries of the Pilot Plan.
Although the NWA Defendants were not trustees of the IAM Plan, Hastings and
Karpiuk assert that they are fiduciaries because they have the authority under the
collective bargaining agreements to reject IAM’s appointment or removal of trustees.
Hastings and Karpiuk claim that the NWA Defendants and the Pilot Defendants
breached their fiduciary duty under ERISA, 29 U.S.C. §§ 1109, 1132(a)(2).
Specifically, Hastings and Karpiuk allege that (1) the defendants failed to prudently
and loyally manage the IAM Plan’s and Pilot Plan’s assets; (2) the NWA Defendants
failed to adequately monitor the IAM trustees and the Pilot Defendants by not
ensuring that they had accurate information regarding NWA’s deteriorating business
prospects; and (3) certain NWA Defendants breached their duty to avoid conflicts of
interest because they failed to ensure that the IAM Plan and the Pilot Plan divested
their holdings of NWA common stock when it appeared imprudent to continue
holding it, thus ensuring that their personal NWA common stock holdings could be
sold at a higher price.
The defendants filed motions to dismiss pursuant to Federal Rules of Civil
Procedure 12(b)(1) and 12(b)(6). With respect to the IAM Plan, the district court
dismissed the case against the NWA Defendants because the RLA’s mandatory
2Although the district court stated that the RLA preempted the ERISA claims,
“[p]reemption is not the applicable doctrine under these circumstances, since the
question whether one federal law takes precedence over another does not implicate the
Supremacy Clause.” Coker v. Trans World Airlines, Inc., 165 F.3d 579, 583 (7th Cir.
1999). The district court no doubt meant that the RLA applied in this case and
divested the federal courts of subject matter jurisdiction.
arbitration provision, 45 U.S.C. § 184, divested the district court of subject matter
jurisdiction.2 With respect to the Pilot Plan, the district court dismissed the case
against the Pilot Defendants and the NWA Defendants, holding that Hastings and
Karpiuk did not have statutory standing under ERISA, 29 U.S.C. §§ 1132(a)(2),
(e)(1), because neither was a participant, beneficiary or fiduciary of the Pilot Plan.
Hastings and Karpiuk appeal.
“We review de novo the grant of a motion to dismiss for lack of subject matter
jurisdiction under Rule 12(b)(1) and the grant of a motion to dismiss for failure to
state a claim under Rule 12(b)(6).” OnePoint Solutions, LLC v. Borchert, 486 F.3d
342, 347 (8th Cir. 2007) (internal citations omitted). We must accept all factual
allegations in the pleadings as true and view them in the light most favorable to the
nonmoving party. Kohl v. Casson, 5 F.3d 1141, 1148 (8th Cir. 1993) (stating the
standard of review regarding an appeal from the grant of a Rule 12(b)(6) motion);
Osborn v. United States, 918 F.2d 724, 729 n.6 (8th Cir. 1990) (finding that “the nonmoving
party receives the same protections [for facial attacks under 12(b)(1)] as it
would defending against a motion brought under Rule 12(b)(6)”).
A. The IAM Plan
Congress expanded the RLA to the airline industry to promote stability in labormanagement
relations between carriers by air and their employees. 45 U.S.C. §§
151a, 181, 184; Hawaiian Airlines, Inc. v. Norris, 512 U.S. 246, 252 (1994). To
accomplish this goal, the RLA requires parties to arbitrate all “minor disputes” before
an adjustment board, which Congress authorized to settle labor-management disputes
regarding collective bargaining agreements in the airline industry. Hawaiian Airlines,
512 U.S. at 252; see 45 U.S.C. § 185; Jenisio v. Ozark Airlines Inc. Ret. Plan for
Agent & Clerical Employees, 187 F.3d 970, 972-73 (8th Cir. 1999). Minor disputes
involve “disputes . . . growing out of . . . the interpretation or application of [collective
bargaining] agreements concerning rates of pay, rules, or working conditions.”
Jenisio, 187 F.3d at 972-73 (quoting 45 U.S.C. § 184). “[T]here is a presumption that
disputes are minor and thus arbitrable.” Id. at 973. “The [adjustment] [b]oard has
mandatory, exclusive, and comprehensive jurisdiction over minor disputes . . . .” Id.
(citing Bhd. of Locomotive Eng’rs v. Louisville & Nashville R.R., 373 U.S. 33, 39
Hastings and Karpiuk assert that Congress did not intend the RLA’s mandatory
arbitration scheme to apply to ERISA claims. However, this court has held that the
RLA’s arbitration requirement applies to ERISA claims if the pension plan is (1) itself
a collective bargaining agreement or (2) maintained pursuant to a collective
bargaining agreement. Id. Hastings and Karpiuk do not dispute that the IAM Equity
Agreement, the IAM Trust Agreement and the merger agreement constitute collective
bargaining agreements and that the IAM Plan was maintained pursuant to them.
Therefore, the RLA’s arbitration requirement can apply to these ERISA claims.
Hastings and Karpiuk next argue that their ERISA breach of fiduciary duty
claims are not minor disputes because they do not concern rates of pay, rules, or
working conditions. See id. at 972-73 (holding that “disputes . . . growing out of . .
. the interpretation or application of agreements concerning rates of pay, rules, or
working conditions” constitute minor disputes within the exclusive jurisdiction of the
RLA’s arbitration board). Here, the IAM Equity Agreement and the IAM Trust
Agreement concerned the rate of pay between NWA and IAM members because
NWA preferred stock was provided to IAM members as consideration for wage
concessions. Therefore, any interpretation or application of the IAM Equity
Agreement or the IAM Trust Agreement constitutes a minor dispute within the
exclusive jurisdiction of the RLA adjustment board.
Hastings and Karpiuk contend that the determination of a breach of fiduciary
duty in this case is independent of an interpretation or application of the collective
bargaining agreements. The district court, rather than the RLA arbitration board, has
jurisdiction over ERISA claims that are independent of an interpretation or application
of any collective bargaining agreements, even if the pension plan is created or
maintained pursuant to a collective bargaining agreement. See Air Line Pilots Ass’n,
Int’l v. Northwest Airlines, Inc., 627 F.2d 272, 277 (D.C. Cir. 1980). In Air Line
Pilots, NWA collected interest accumulated as a result of its unreasonable delay in
payments due under a pension plan. Id. at 274. In rejecting NWA’s efforts to compel
RLA arbitration, the court held that ALPA’s breach of fiduciary duty claim was
independent of the collective bargaining agreement because even if NWA’s conduct
in keeping the interest was permissible under a proper interpretation of the plan,
NWA’s failure to act solely for the benefit of the plan participants could still
constitute a breach of fiduciary duties under ERISA. Id. at 277. However, in Everett
v. USAir Group, Inc., 927 F.Supp. 478 (D.D.C. 1996), aff’d, 194 F.3d 173 (D.C. Cir.
1999), the district court determined that it lacked subject matter jurisdiction due to the
RLA because the breach of fiduciary duty claim was not independent of a collective
bargaining agreement. Id. at 483. There, the collective bargaining agreement
included the method for calculating pension benefits. Id. at 480. To determine
whether USAir wrongfully excluded dividends from its calculation of plan benefits
required first the proper interpretation of the benefit calculation method described in
the collective bargaining agreement. Id. at 483. Therefore, the court held that the
breach of fiduciary duty claim was not independent of the collective bargaining
agreement because determining if USAir improperly calculated plan benefits “turn[ed]
on whether USAir’s interpretation of the plan [was] incorrect or misleading.” Id.
As in Everett, Hastings’s and Karpiuk’s breach of fiduciary duty claims are not
independent of the collective bargaining agreements. The NWA Defendants deny that
they are fiduciaries of the IAM Plan. The NWA Defendants are not trustees of the
IAM Plan. However, because the IAM Equity Agreement and the IAM Trust
Agreement require NWA’s concurrence whenever the IAM appoints or removes
trustees, Hastings and Karpiuk argue that NWA effectively has the power to appoint
and remove trustees and, therefore, is a fiduciary of the IAM Plan. See Hickman v.
Tosco Corp., 840 F.2d 564, 566 (8th Cir. 1988) (holding that the power to appoint
trustees makes one a fiduciary under ERISA). By their own assertions, the
determination of NWA’s power to appoint and remove a trustee requires an
interpretation and application of the collective bargaining agreements. Thus, the
determination of whether or not the NWA Defendants owe fiduciary duties to IAM
Plan participants is not independent of an interpretation or application of the collective
bargaining agreements. Because the breach of fiduciary duty claims involving the
IAM Plan require an interpretation and application of the collective bargaining
agreements, they constitute minor disputes within the exclusive jurisdiction of the
RLA adjustment board. See Jenisio, 187 F.3d at 973.
Finally, Hastings and Karpiuk claim that the NWA Defendants are estopped
from asserting that the RLA arbitration board has jurisdiction because NWA
distributed pamphlets indicating that IAM Plan participants may file suit in federal
court. However, “parties to a [collective bargaining agreement] may not circumvent
the RLA’s arbitration requirement (and thereby vest subject matter jurisdiction in the
district court) by contractual agreement.” Jenisio, 187 F.3d at 974; accord Bowe v.
Northwest Airlines, Inc., 974 F.2d 101, 103-104 (8th Cir. 1992) (“Parties to an
agreement cannot create federal subject matter jurisdiction by consent.”). Therefore,
the district court correctly concluded that it lacked subject matter jurisdiction over the
claims that the NWA Defendants breached fiduciary duties owed to IAM Plan
B. The Pilot Plan
“To bring a civil action under ERISA, a plaintiff must have . . . statutory
standing.” Leuthner v. Blue Cross & Blue Shield of Northeastern Pa., 454 F.3d 120,
125 (3d Cir. 2006); accord Adamson v. Armco, Inc., 44 F.3d 650, 655 (8th Cir. 1995)
(holding that plaintiffs lacked statutory standing). To have statutory standing under
ERISA for a breach of fiduciary duty claim, a plaintiff must be “a participant,
beneficiary or fiduciary” of the ERISA plan. 29 U.S.C. § 1132(a)(2). Hastings and
Karpiuk, as IAM members, have not alleged that they were participants, beneficiaries
or fiduciaries of the Pilot Plan. Therefore, Hastings and Karpiuk lack standing over
their claims that the NWA Defendants and the Pilot Defendants breached their
fiduciary duties to Pilot Plan participants and beneficiaries.
Nonetheless, Hastings and Karpiuk argue that they have standing by virtue of
having brought a class action pursuant to Federal Rule of Civil Procedure 23 because
“an individual in one ERISA benefit plan can represent a class of participants in
numerous [ERISA benefit] plans other than his own, if the gravamen of the plaintiff’s
challenge is to the general practices which affect all of the plans.” Fallick v.
Nationwide Mut. Ins. Co., 162 F.3d 410, 422 (6th Cir. 1998); accord Forbush v. J.C.
Penney Co., 994 F.2d 1101, 1105-06 (5th Cir. 1993). Our circuit has not adopted this
rule, and we need not decide whether to adopt such a rule at this time. Because the
district court does not have subject matter jurisdiction over the breach of fiduciary
duty claims involving the IAM Plan, Hastings and Karpiuk cannot rely on those
claims to establish standing for similar causes of action brought on behalf of the Pilot
Plan participants and beneficiaries. As a result, Hastings and Karpiuk must have
standing to pursue their breach of fiduciary duty claims involving the Pilot Plan and
cannot rely on Fallick and Forbush to obtain such standing. See Hall v. Lhaco, Inc.,
140 F.3d 1190, 1196 (8th Cir. 1998) (holding that an individual who lacks standing
to pursue a claim under one ERISA benefit plan cannot obtain standing over that same
plan through a class action lawsuit). Because Hastings and Karpiuk were not
3We also deny the Pilot Defendants’ pending motion to strike or, in the
alternative, to respond to certain matters contained in Hastings’s and Karpiuk’s reply
participants, beneficiaries or fiduciaries of the Pilot Plan, the district court correctly
held that Hastings and Karpiuk lacked standing to bring claims on behalf of the Pilot
Plan participants and beneficiaries.
Because we conclude that the district court did not err in granting the motions
to dismiss, we affirm.3
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