United States District Court, D. Maryland
LABORERS' DIST. COUNCIL PENSION & DISABILITY TRUST FUND No. 2, et al., Plaintiffs,
GEOFREEZE, INC., Defendant.
JAMES K. BREDAR, District Judge.
This case was filed in August of 2012 by Plaintiffs, who are three multiemployer employee benefit plans (the "Funds"), as defined in the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1002(37)(A) and 1145, and two trustees of the Funds. They brought this action to enforce the Funds' rights to employer contributions, as established in the collective bargaining agreement ("CBA") between the union, Baltimore/Washington Laborers' District Council (the "Union"), and the employer, Geofreeze Construction Corporation ("GCC") and Geofreeze, Inc. ("Geofreeze"). (Compl., ECF No. 1.)
After Defendants were granted extensions of time to respond to the complaint, the parties jointly moved for a stay to permit time in which an audit of Defendants' records could be completed. (ECF No. 10.) In the Fall of 2013, the parties reported that the audit was completed, that GCC had filed for bankruptcy, but that Plaintiffs and Geofreeze were discussing a possible resolution of the case. (ECF No. 17.) Plaintiffs then voluntarily dismissed GCC (ECF Nos. 22, 23) and moved to lift the stay (ECF No. 24), and that motion was granted (ECF No. 27). They subsequently filed an amended complaint against Geofreeze, which was asserted to be liable under a single-employer theory, for the unpaid contributions to the Funds. (ECF No. 28.) After filing its answer to the amended complaint (ECF No. 30), Geofreeze filed a third-party complaint against the Union, asserting that if Geofreeze were found liable for the unpaid contributions, then the Union would be liable to Geofreeze under theories of fraud in the inducement and negligent misrepresentation based on statements made by an agent and employee of the Union, Eugene Pinder, to GCC in order to get GCC to agree to the CBA. (ECF No. 32.)
Plaintiffs' motion to strike the third-party complaint (ECF No. 33) is now pending before the Court. It has been briefed (ECF Nos. 35, 37), and no hearing is necessary, Local Rule 105.6 (D. Md. 2011). The motion will be granted. The Union's motion to dismiss or, in the alternative, motion for summary judgment (ECF No. 38), will be deemed moot.
II. Standard for Allowing or Striking a Third-Party Complaint
"A defending party may, as third-party plaintiff, serve a summons and complaint on a nonparty who is or may be liable to it for all or part of the claim against it." Fed.R.Civ.P. 14(a)(1). Because Geofreeze's third-party complaint was filed 14 days after its answer, it was not necessary for Geofreeze to seek the Court's leave before filing. Nevertheless, Rule 14(a)(4) permits any party to move to strike the third-party claim. In that instance, the district court's decision whether to grant the motion is discretionary. Duke v. R. F. C., 209 F.2d 204, 208 (4th Cir. 1954). See also Fed.R.Civ.P. 14, Advisory Committee Notes, 1963 Amendment ("the court has discretion to strike the third-party claim if it is obviously unmeritorious and can only delay or prejudice the disposition of the plaintiff's claim").
When considering the substance of a third-party complaint, "[i]t is not sufficient that the third-party claim is a related claim; the claim must be derivatively based on the original plaintiff's claim." United States v. One 1977 Mercedes Benz, 708 F.2d 444, 452 (9th Cir. 1983), quoted in Scott v. PPG Industries, Inc., 920 F.2d 927, 1990 WL 200655, at *3 (4th Cir. 1990) (unpublished). For the sake of argument, the Court here assumes that Geofreeze's claim of liability against the Union is derivative of Plaintiffs' claim against Geofreeze. See, e.g., Northwestern Ohio Adm'rs, Inc. v. Walcher & Fox, Inc., 270 F.3d 1018, 1026-31 (6th Cir. 2001) (in ERISA case seeking unpaid fund contributions, permitting employer's third-party suit against union on ground of fraud in inducement in entering into CBA; not considering Rule 14); Trs., Sheet Metal Workers' Local Union No. 80 Pension Trust Fund v. W.G. Heating & Cooling, 555 F.Supp.2d 838, 848-50 (E.D. Mich. 2008) (concluding employer's third-party complaint of fraud and misrepresentation against union derivative of ERISA action for unpaid employer contributions to employee benefit funds and, therefore, properly brought under Rule 14). That is not the only consideration, however, when considering whether a third-party claim should be allowed or stricken.
The Fourth Circuit has stated that a primary objective of third-party procedure is to avoid circuity and multiplicity of actions. Noland Co. v. Graver Tank & Mfg. Co., 301 F.2d 43, 50 (4th Cir. 1962). Thus, the purpose of this procedure
is to prevent circuity of action by drawing into one proceeding all parties who may become ultimately liable, so that they may therein assert and have a determination of their various claims inter sese. This is intended to save the time and cost of duplicating evidence and to obtain consistent results from identical or similar evidence, as well as to avoid the serious handicap of a time lag between a judgment against the original defendant and a judgment in his favor against the third-party defendant.
Am. Export Lines, Inc. v. Revel, 262 F.2d 122, 124-25 (4th Cir. 1958).
In Duke v. R. F. C ., the Fourth Circuit considered whether the district court should have stricken a third-party complaint based upon the third-party complaint's distinctive separateness from the plaintiff's main action. The Court noted that the strongest ground asserted for reversing the district court's decision was "that the various claims involved in this complicated litigation all have a common source and that it would be more economical and expeditious to adjudicate them in [a] single civil action." 209 F.2d at 208. However, the Court gave due consideration to the district court's observation that the original action was one for breach of contract while the third-party action was "a separate and distinct controversy between parties subsequently impleaded, namely, the main contractor and one of his subcontractors involving entirely distinct issues of alleged fraud and misrepresentation on the part of the former in his business relations with the latter.'" Id. at 208-09. The Court further noted that the third-party plaintiffs were not seriously prejudiced by the district court's ruling since they could sue the third-party defendant in State court. Id. at 209.
The Court distinguished the case of Glens Falls Indem. Co. v. Atlantic Bldg. Corp., 199 F.2d 60 (4th Cir. 1952), in which the facts the plaintiff was required to establish in its claim against the defendant insurer were the same facts relevant to the insurer's third-party claim against the insured's president. Id. at 63. Thus, in Glens Falls, the Court reversed the district court's dismissal of the third-party complaint, id. at 64, but in Duke, the Court affirmed the striking of the third-party complaint, 209 F.2d at 209. In Noland, the Court also focused on the similarity of facts underlying the plaintiff's original claim and those underlying the third-party claim. Consequently, whether one ...