Trustees Of The New York City District Council Of Carpenters Pension Fund v…

Background

The plaintiffs, employee benefit funds, sued under Sections 502(a)(3) and 515 of the Employee Retirement Income Security Act (ERISA) and Section 301 of the Labor Management Relations Act (LMRA). They alleged that M.C.F. Associates, Inc. was bound by two collective bargaining agreements requiring employer contributions and access to books and payroll records for audits. They also alleged that M.C.F. was wound down in 2018 and that its business was transferred to Performance Construction, Inc., which they claimed was M.C.F.’s alter ego and successor.

The defendants denied, among other things, that Performance was M.C.F.’s alter ego or successor, that Performance’s carpentry work fell within the agreements’ trade or geographic jurisdiction, and that the companies had substantially similar operations. The defendants asserted seven affirmative defenses. The plaintiffs moved under Federal Rule of Civil Procedure 12(f) to strike the second defense, based on unclean hands, and the fifth defense, based on freedom to contract.

The defendants separately asked the court to strike two declarations submitted with the plaintiffs’ reply and to disregard portions of the reply relying on documents attached to those declarations. The court found no basis to strike the declarations or documents because the agreements were incorporated into the complaint and M.C.F., as a signatory, was aware of them. Out of caution, however, the court agreed not to consider those documents or the portions of the reply expressly relying on them when deciding the motion to strike.

Legal Standard

Rule 12(f) permits a court to strike an insufficient, redundant, immaterial, impertinent, or scandalous matter from a pleading. The court explained that motions to strike affirmative defenses are disfavored. It applied three considerations: whether the defense was plausible, whether it was legally sufficient to prevent the plaintiffs from prevailing, and whether the plaintiffs would be prejudiced by having to litigate it.

Unclean-Hands Defense

The defendants based their unclean-hands defense on allegations that the unions had generally mishandled labor conditions over approximately fifty years. The court held that the defense was legally insufficient because it did not allege misconduct by the plaintiffs themselves. The court further held that, even assuming the unions’ alleged conduct could be attributed to the plaintiffs, the defense lacked the required direct connection to the ERISA claims and enforcement of the collective bargaining agreement.

The court also concluded that the defense was inconsistent with limits on defenses available to an employer sued under ERISA Section 515. The defendants’ allegations were conclusory and did not meet the plausibility standard for affirmative defenses. Finally, the court found that requiring the plaintiffs to litigate this legally and factually insufficient defense would prejudice them through added time and expense. The court therefore granted the plaintiffs’ motion to strike the second affirmative defense.

Freedom-to-Contract Defense

The fifth affirmative defense asserted that enforcing the plaintiffs’ claims against Performance would violate the defendants’ constitutional freedom to contract. The court found that the defendants offered only a conclusory statement and no supporting facts.

The court also rejected the legal theories identified by the defendants. It explained that the federal constitutional prohibition on impairing contracts is directed at state statutes, and the defendants provided no basis for applying it to a federal court’s enforcement of a judgment. The court found the defendants’ Fourteenth Amendment theory speculative and legally meritless because enforcement of a valid ERISA claim would not itself create an unconstitutional violation. The court again found prejudice from requiring the plaintiffs to litigate an insufficient defense and granted the motion to strike the fifth affirmative defense.

Disposition

Judge Alison J. Nathan granted the plaintiffs’ motion to strike. The order struck the second affirmative defense, based on unclean hands, and the fifth affirmative defense, based on freedom to contract. It also resolved the defendants’ request concerning the reply materials by declining to consider the challenged documents and the portions of the reply expressly relying on them. The order did not resolve the merits of the plaintiffs’ claims for contributions, the alter-ego or successor allegations, or the defendants’ remaining defenses. The post-discovery conference was scheduled to proceed on May 14, 2021.