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Jones v. Canal Wood, LLC

United States District Court, E.D. North Carolina, Western Division

March 26, 2019

HAROLD JONES, LUIS GONZALEZ, HODGES SESSOMS, and GLENN SURLES, Plaintiffs,
v.
CANAL WOOD, LLC; CANAL CHIP, LLC also known as North Carolina Chip, LLC; and CANAL HOLDINGS, LLC, Defendants.

          ORDER

          LOUISE W. FLANAGAN UNITED STATES DISTRICT JUDGE

         This matter is before the court on defendants' motions to dismiss for failure to state a claim (DE 23, 25). Plaintiffs responded in opposition and defendants replied. In this posture, the issues raised are ripe for ruling. For the following reasons, defendants' motions are granted.

         STATEMENT OF THE CASE

         This action arises out of the closing of a wood-chipping plant in Wilson County, North Carolina (the “NC Chip Mill”). Plaintiffs are former workers at the NC Chip Mill who claim defendants owe them severance benefits and other relief under an employee benefit plan pursuant to the Employee Retirement Income Security Act (ERISA).

         Plaintiffs filed a putative class action complaint on June 13, 2018, on behalf of themselves and all others similarly situated, attaching and relying upon a document titled “The Canal Industries, Inc. Severance Benefit Plan” (the “Plan”), and seeking the following relief:

1) “[T]o recover benefits due, enforce their rights to benefits, and clarify their rights to benefits under the Plan, ” pursuant to ERISA, 29 U.S.C. § 1132(a)(1)(B);
2) “[T]o pursue remedies for breach of fiduciary duty” under ERISA, 29 U.S.C. § 1109, pursuant to 29 U.S.C. § 1132(a)(2);
3) “[T]o enjoin further violations and obtain other appropriate equitable relief, ” pursuant to ERISA, 29 U.S.C. §1132(a)(3); and
4) “[T]o recover attorneys' fees and costs, ” pursuant to ERISA, 29 U.S.C. § 1132(g).

(Compl. ¶1).

         Plaintiffs assert that defendants are “successor[s]” to non-party Canal Industries, Inc., (id. ¶¶ 9-11), and that they are related to Canal Industries, Inc., in such manner as to subject them to liability to plaintiffs under the Plan, which relationships the court discusses in further detail herein.

         Defendant Canal Holdings, LLC, filed the instant motion to dismiss for failure to state a claim on August 28, 2018, pursuant to Federal Rule of Civil Procedure 12(b)(6), relying in part upon articles of merger filed with the South Carolina Secretary of State. On the same date defendants Canal Wood, LLC, and Canal Chip, LLC, filed their motion to dismiss, relying upon the following documents:

1) Affidavit of Cheryl Bradford, a human resources manager for defendant Canal Wood, LLC;
2) “Asset Purchase Agreement” by and between non-party North Carolina Chip Company, non-party Canal Industries, Inc., and defendant Canal Wood, LLC, dated April 30, 2001 (“NC Chip APA”);
3) “Articles of Merger of Domestic and Foreign Corporations into [non-party] Canal Wood Corporation”;
4) State of South Carolina, Secretary of State, “Articles of Organization Limited Liability Company”;
5) State of Delaware, Secretary of State, “Certificate of Formation of [non-party] Canal Acquisition, LLC”;
6) State of Delaware, Secretary of State, “Certificate of Formation of [defendant] Canal Chip, LLC”;
7) “Annual Return/Report of Employee Benefit Plan”; and
8) Department of the Treasury, Internal Revenue Service 2016 “Instructions for Form 5500.”

         Plaintiffs responded in opposition to the motions to dismiss on October 12, 2018, stating in part that if the court considers the documents attached to the motion to dismiss by defendants Canal Wood, LLC, and Canal Chip, LLC, then the court should convert the motion to one for summary judgment and also consider the following documents in opposition thereto, attached to plaintiffs' response:

1) “North Carolina General Warranty Deed” between non-parties Canal Industries, Inc., and North Carolina Chip Company;
2) Plaintiffs' declarations;
3) Declaration of William Joseph Austin, Jr., attorney for plaintiffs, attaching additional exhibits including correspondence, memoranda, and corporate documents.

         On November 2, 2018, defendants Canal Wood, LLC, and Canal Chip, LLC, filed a document comprising: 1) a response and objection to plaintiffs' request to convert the motion to dismiss to one for summary judgment, and 2) objection to certain exhibits attached to plaintiffs' opposition. Defendants also filed on the same date replies in support of their motions to dismiss. On November 20, 2018, plaintiffs responded to the response and objections by defendants Canal Wood, LLC, and Canal Chip, LLC.

         STATEMENT OF THE FACTS

         The facts alleged in the complaint may be summarized as follows.[1] Throughout the 1990s and up to and including March 30, 2001, plaintiffs were employed at NC Chip Mill and paid by non-party Canal Industries, Inc., from its central office located in Conway, South Carolina. During that time, plaintiffs were offered severance benefits described in the Canal Industries, Inc., Employee Handbook as follows:

[Non-party] Canal Industries, Inc. offers severance pay for all executive and non-executive positions during the times of job elimination or layoffs. For non-executive management positions the company will grant one week of pay for every full year of employment up to a maximum of 26 weeks. If the employee has worked for the company for less than 4 years, a minimum of four weeks' pay will be granted.

(Compl. ¶ 13).

         Effective May 22, 2000, non-party Canal Industries, Inc., adopted the Plan, which by its terms “govern[s] all payments made to ‘Eligible Employees' as defined [therein] on account of separation from employment, including separation that may occur due to job elimination or lay off.” (Plan “Preliminary Statement” (DE 1-1 at 12)). Key terms of the Plan, as pertinent to the instant motions are as follows.

         The Plan provides generally an entitlement to severance benefits, in that an “Eligible Employee shall be entitled to a benefit, payable as set forth [in the Plan], in a total amount equal to his or her Basic Severance Pay as calculated [in the Plan], provided that he or she incurs an involuntary termination of employment with a Participating Employer.” (Plan § 2.1).[2] The plan provides an exclusion in the following circumstance, as pertinent here:

2.4 In the event of the “Sale of the Employer” (as defined in this Section 2.4) by which the Employee is employed, benefits shall not be paid, and if payment of Severance Pay has commenced, such payment shall be discontinued ...

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