Greenblatt v. Delta Plumbing & Heating Corp.

• Decision Date: 09 April 1993
• Docket Number: No. 89 Civ. 7759 (RWS).,89 Civ. 7759 (RWS).
• Citation: 818 F. Supp. 623
• Parties: William GREENBLATT and Peter N. Salzarulo, as Chairman and Co-Chairman, respectively and Trustees of the Joint Industry Board of the Plumbing Industry of the City of New York and Funds Administered by Joint Industry Board of the Plumbing Industry of the City of New York, Peter N. Salzarulo, in his capacity as President of Local Union No. 2 of the United Association of Journeymen and Apprentices of the Plumbing and Pipe Fitting Industry of the United States and Canada, AFL-CIO, Peter N. Salzarulo, Individually and Local Union No. 2 of the United Association of Journeymen and Apprentices of the Plumbing and Pipe Fitting Industry of the United States and Canada, AFL-CIO, Plaintiffs, v. DELTA PLUMBING & HEATING CORP. and New York Surety Company, Defendants.
• Court: U.S. District Court — Southern District of New York

818 F. Supp. 623

William GREENBLATT and Peter N. Salzarulo, as Chairman and Co-Chairman, respectively and Trustees of the Joint Industry Board of the Plumbing Industry of the City of New York and Funds Administered by Joint Industry Board of the Plumbing Industry of the City of New York, Peter N. Salzarulo, in his capacity as President of Local Union No. 2 of the United Association of Journeymen and Apprentices of the Plumbing and Pipe Fitting Industry of the United States and Canada, AFL-CIO, Peter N. Salzarulo, Individually and Local Union No. 2 of the United Association of Journeymen and Apprentices of the Plumbing and Pipe Fitting Industry of the United States and Canada, AFL-CIO, Plaintiffs, v. DELTA PLUMBING & HEATING CORP. and New York Surety Company, Defendants.

No. 89 Civ. 7759 (RWS).

United States District Court, S.D. New York.

April 9, 1993.

Kaming & Kaming, New York City (Joseph S. Kaming, Elizabeth C. Kaming, of counsel), for plaintiffs.

Hollander & Groner, P.C., New York City (Michael R. Strauss, of counsel), for defendant New York Sur. Co.

OPINION

SWEET, District Judge.

The Plaintiffs, guardians of various Employee Retirement Income Security Act of 1974 (ERISA) Funds (the Joint Industry Board of the Plumbing Industry of the City of New York ("Plumbing Industry Board"), Local Union No. 2 of the United Association of Journeymen and Apprentices of the Plumbing and Pipe Fitting Industry of the United States and Canada, AFL-CIO ("Local Union No. 2") and William Greenblatt and Peter N. Salzarulo, as officers and trustees of the Plumbing Industry Board), brought suit in this Court against Delta Plumbing and Heating Corporation ("Delta") on November 30, 1989, and added the New York Surety Company ("New York Surety") as a named defendant in May, 1990. Delta sought protection from its creditors by filing a voluntary petition in bankruptcy in March, 1991, automatically staying the action against it pursuant to 11 U.S.C. § 362, leaving New York Surety as the sole defendant. In June, 1991 the Plaintiffs brought suit against New York Surety in the New York State Supreme Court.

Defendant New York Surety has moved to dismiss the instant complaint pursuant to the Federal Rules of Civil Procedure, Rule 12(b)(1) on the ground that the Court lacks jurisdiction over the subject matter of the Plaintiffs' claims against New York Surety. For the reasons given below, the motion is denied.

The Complaint

The Plaintiffs' suit alleges claims under the ERISA, 29 U.S.C. § 1001 et seq., the Labor Management Relations Act of 1947 ("LMRA"), 29 U.S.C. § 152 et seq., and pendent state-law claims, stemming from a one-page agreement Delta signed with the Plaintiffs on March 7, 1978 to abide by a collective bargaining agreement (the "Agreement"). The Agreement itself is between the Plumbers Local No. 2 United Association and the Association of Contracting Plumbers of the City of New York, dated June 30, 1976. Article 2 of the Agreement itself, which the Court may consider since the Plaintiffs attached it as integral to their complaint (see Cortec Indus., Inc. v. Sum Holding, L.P., 949 F.2d 42, 48 (2d Cir.1991)), requires each employer of the Plaintiffs to make timely payments to the Plumbing Industry Board for fringe benefits, supplemental benefits and contributions. Article 3 of the Agreement requires each employer under the terms of the Agreement to furnish a bond "to the benefit of the Joint Plumbing Industry Board to guarantee the payment of the Fringe Benefits herein mentioned, Security Benefits and any and all other benefits and contributions."

Delta secured its obligations with a bond from New York Surety, which was not a signatory to the Agreement between Delta and the Plaintiffs. Delta subsequently defaulted on its obligations under the Agreement, and by November 20, 1989, the Plumbing Industry Board alleged that Delta owed it some $96,000 plus interest in unpaid fringe benefits.

Discussion

It is axiomatic that every cause of action in a federal court must have a jurisdictional basis. The assertion of federal jurisdiction must meet both a constitutional and a statutory standard: the claim must be within the scope of Article III, and Congress must have exercised its constitutional authority to confer jurisdiction on the federal courts. Owen Equipment & Erection Co. v. Kroger, 437 U.S. 365, 372, 98 S.Ct. 2396, 2401-02, 57 L.Ed.2d 274 (1978). The Plaintiffs have alleged that this Court has direct federal question jurisdiction over New York Surety since New York Surety is an "employer" under ERISA and that, in any event, this Court has "pendent party" jurisdiction over their state-law claims against New York Surety under United Mine Workers of America v. Gibbs, 383 U.S. 715, 725, 86 S.Ct. 1130, 1138, 16 L.Ed.2d 218 (1966).

The Definition of "Employer" Under ERISA

Although the Plaintiffs allege only contract claims against New York Surety in their Amended Complaint, in their Memorandum of Law they state that the Amended Complaint pleads direct subject matter jurisdiction. They allege that subject matter jurisdiction is granted to this court by Section 515 of ERISA (29 U.S.C. § 1145) that employers make good delinquent contributions:

Every employer who is obligated to make contributions to a multiemployer plan under the terms of the plan or under the terms of a collectively bargained agreement shall, to the extent not inconsistent with law, make such contributions in accordance with the terms and conditions of such plan or such agreement.

The definition of an ERISA "employer" given in Section 3, 29 U.S.C. § 1002:

(5) The term "employer" means any person acting directly as an employer, or indirectly in the interest of an employer in relation to an employee benefit plan.

The Plaintiffs allege that New York Surety comes under the definition of employer because it is "a signatory to certain collective bargaining obligations as presented in the bond" between it and Delta (Pl. Mem. at 4), since "the collective bargaining agreement is incorporated as part of the Bond." The relevant section of the Bond as quoted by the Plaintiffs reads:

.... if the Principal Delta shall pay to the Obligee the Plaintiffs (1) an amount equal to all required fringe benefits under the Collective Bargaining Agreement on all classifications of employees covered thereunder ... which amounts shall be due to the Obligee during the term of said Agreement ... Then this obligation shall be void....

Pl. Mem. at 5.

The Plaintiffs' argument has been rejected in the Ninth and the Eleventh Circuits, see Carpenters Southern Cal. Admin. Corp. v. D & L Camp Const., 738 F.2d 999, 1000-01 (9th Cir.1984) (also rejecting pendent party jurisdiction over the claim); Carpenters Southern Cal. Admin. Corp. v. Majestic Housing, 743 F.2d 1341, 1346 (9th Cir.1984); Xaros v. U.S. Fidelity and Guar. Co., 820 F.2d 1176, 1180 (11th Cir.1987); Local 938 Joint Health & Welfare Trust Fund v. B.R. Starnes Co., 827 F.2d 1454 (11th Cir.1987); Giardiello v. Balboa Insurance Co., 837 F.2d 1566, 1569 (11th Cir.1988), on the grounds that a surety, not being a signatory to the collective bargaining agreement, cannot be an employer under ERISA of the unionized workers. The issue has not arisen for consideration in this Circuit.

Regardless of the cases cited above, the Plaintiffs' position is adopted. Based on the reasoning in these cases, the Defendants make three arguments: that sureties have not been named as employers either in the legislative history or in the statute, that the sureties cannot be liable for obligations in the collective bargaining agreement without being signatories, and that sureties do not bond the employers' obligation solely for the benefit of the employees. This Court is not persuaded by the first two, and in this instance the third does not seem to apply.

The argument based on legislative history is put most succinctly by the court in Xaros:

Neither the legislative history of ERISA, see 1974 U.S.Code Cong. & Adm.News 4639, nor of its 1980 amendments, see 1980 U.S.Code Cong. & Ad.News 2918, indicate that Congress meant to expand the concept of employer or the jurisdiction of the federal courts to include sureties, whose obligations are fixed by contract....

Xaros, 820 F.2d at 1179. While nothing in the legislative history directly expands federal jurisdiction under ERISA over private sureties, nothing in the legislative history excludes them either. Congress enacted ERISA in 1974 to regulate employers' pension plans in order to ensure that employees would receive their vested retirement benefits. Nachman Corp. v. Pension Benefit Guaranty Corp., 446 U.S. 359, 361-362, 374-375, 100 S.Ct. 1723, 1726-1727, 1732-1733, 64 L.Ed.2d 354 (1980); Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 510-511, 101 S.Ct. 1895, 1899-1900, 68 L.Ed.2d 402 (1981). Nachman describes ERISA as a "comprehensive and reticulated" statute:

Title I of ERISA, § 2 et seq., 29 U.S.C. § 1001 et seq., requires administrators of all covered pension plans to file periodic reports with the Secretary of Labor, mandates minimum participation, vesting and funding schedules, establishes standards of fiduciary conduct for plan administrators, and provides for civil and criminal enforcement of the Act. Title II, ERISA § 1001 et seq., amended various provisions of the Internal Revenue Code of 1954 pertaining to qualification of pension plans for special tax treatment.... Title III, ERISA § 3001-3043, 29 U.S.C. § 1201 et seq., contains provisions designed to coordinate enforcement efforts of different federal departments.... Title IV, ERISA §§ 4001-4082, 29 U.S.C. § 1301 et seq., created the Pension Benefit Guaranty Corporation (PBGC) and a termination insurance program....

Nachman, 446 U.S. at 361, n. 1, 100 S.Ct. at 1726, n. 1. In Nachman, an employer closed its plant and "terminated the pension plan covering the persons employed at that plant on December 31, 1975, the day before ERISA...