Albradco, Inc. v. Bevona

• Decision Date: 03 April 1992
• Docket Number: No. 90 Civ. 7846 (PKL).,90 Civ. 7846 (PKL).
• Citation: 788 F. Supp. 786
• Parties: ALBRADCO, INC. and Elias Strum, Plaintiffs, v. Gus BEVONA, as President of 32B-32J Service Employees International Union, AFL-CIO, and as Trustee of the Building Service 32B-J Health Fund and the Building Service 32B-J Pension Fund, 32B-32J Service Employees International Union, AFL-CIO, Building Service 32B-J Health Fund, and Building Service 32B-J Pension Fund, Defendants.
• Court: U.S. District Court — Southern District of New York

788 F. Supp. 786

ALBRADCO, INC. and Elias Strum, Plaintiffs, v. Gus BEVONA, as President of 32B-32J Service Employees International Union, AFL-CIO, and as Trustee of the Building Service 32B-J Health Fund and the Building Service 32B-J Pension Fund, 32B-32J Service Employees International Union, AFL-CIO, Building Service 32B-J Health Fund, and Building Service 32B-J Pension Fund, Defendants.

No. 90 Civ. 7846 (PKL).

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

April 3, 1992.

Graubard Mollen Horowitz Pomeranz & Shapiro (Steven Mallis, Barbara J. Romaine, Nancy R. Sills, of counsel), New York City, for plaintiffs.

Shea & Gould (Joseph Ferraro, Eve I. Klein, Richard A. Lafont, John K. Mara, Barry N. Saltzman, of counsel), New York City, for defendants.

ORDER AND OPINION

LEISURE, District Judge.

In this action, plaintiffs, Albradco, Inc. ("Albradco") and Elias Strum ("Strum") (collectively "declaratory plaintiffs"), now move the Court, pursuant to Fed.R.Civ.P. 56, for a declaratory judgment, pursuant to 28 U.S.C. §§ 2201-2202, declaring that N.Y.B.C.L. § 630 is preempted by section 514 of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1144, or in the alternative, by section 301(a) of the Labor Management Relations Act ("LMRA"), 29 U.S.C. § 185(a), and for an order enjoining the application of N.Y.B.C.L. § 630 to them. Defendants, Gus Bevona, as President of 32B-32J Service Employees International Union, AFL-CIO, and as Trustee of the Building Service 32B-J Health Fund and the Building Service 32B-J Pension Fund; 32B-32J Service Employees International Union, AFL-CIO; Building Service 32B-J Health Fund; and Building Service 32B-J Pension Fund (collectively "the Union"), oppose the declaratory plaintiffs' motion, and cross-move to dismiss this action, pursuant to Fed. R.Civ.P. 12(b)(1) and (6), or, in the alternative, for summary judgment pursuant to Fed.R.Civ.P. 56. For the following reasons, the declaratory judgment action is dismissed.

BACKGROUND

The facts underlying these motions are not in dispute. Albradco is a New York corporation that is the sole shareholder of Bradley Cleaning Contractors, Inc. ("Bradley"), a New York corporation that is currently in bankruptcy, pursuant to Chapter 7 of Title 11 of the United States Code. Strum is a principal shareholder of Albradco and a former president of Bradley. At all times relevant to this action, Bradley was a party to two collective bargaining agreements with the Union that, inter alia, set forth employees' wage rates and required Bradley to make contributions to funds, governed by ERISA, which provided pension and health benefits for Bradley's employees.

In 1982, a dispute arose between Bradley and the Union concerning Bradley's purported operation of two non-union businesses, Electric Savings Corp. ("Electric") and Commerce Office Cleaning Corp. ("Commerce"). The dispute was submitted to arbitration, and, by award dated January 19, 1984, the arbitrator ordered Bradley to pay $1,227,134 in wages and $549,766 in pension and health benefits to the Union, on behalf of employees at Electric and Commerce, as though these employees had been covered by the collective bargaining agreements between Bradley and the Union. Further, a subsequent arbitration award, dated July 20, 1987, directed Bradley and Commerce to pay an additional $1,267,246.15 in wages and $379,401.51 in fund contributions to the Union. The arbitration awards were confirmed by Orders of Hon. Leonard B. Sand, United States District Judge of this Court, dated May 2, 1984 and April 22, 1988. Bradley was unable to continue business under the burden of this debt and filed a Chapter 11 bankruptcy petition on May 16, 1984, which was converted to a Chapter 7 proceeding on December 2, 1986.

Apparently as a result of Bradley's inability to satisfy its liabilities to the Union, Gus Bevona, as president of the Union, instituted an action in January 1986 in the Supreme Court of the State of New York, New York County, entitled Gus Bevona, as President of 32B-32J Service Employees International Union, AFL-CIO v. Albradco, Inc., Elias Strum, William Strum, Estate of Rose Strum and David Herbst, No. 27801/86 ("the State Court Action"). The State Court Action sought to recover the judgments against Bradley from Bradley's shareholders, pursuant to N.Y.B.C.L. § 630, which renders the ten largest shareholders of close corporations personally, jointly and severally liable for "debts, wages or salaries due and owing" to employees, § 630(a), including, as relevant here, "employer contributions to or payments of insurance benefits and employer contributions to pension or annuity funds." § 630(b). The defendants in the State Court Action have contested the Union's claims on various procedural and substantive grounds. However, it appears that no attempt was made to remove the State Court Action to federal court in the first instance.

Rather, four years after the State Court Action was commenced, Albradco and Strum initiated the instant declaratory judgment action, seeking a declaration that the claims asserted in the State Court Action pursuant to N.Y.B.C.L. § 630 are preempted by ERISA. Immediately upon the filing of the instant action, the parties cross-moved for summary judgment on the issue of ERISA preemption, with the declaratory plaintiffs seeking a declaration that the State Court Action is preempted by ERISA and defendants advocating the contrary position. After the ERISA motion became fully submitted, in May 1991, the declaratory plaintiffs amended their complaint, raising the additional claim that the Union's claims under N.Y.B.C.L. § 630 are preempted by the LMRA. Thereafter, additional cross-motions for summary judgment were served and filed addressing the issue of LMRA preemption.

DISCUSSION

A. Scope of ERISA Preemption Doctrine

The Court begins its analysis by examining the ERISA preemption doctrine. Congressional intent is the guiding principle in ascertaining whether a state law is preempted by a federal statute. See Ingersoll-Rand Co. v. McClendon, ___ U.S. ___, 111 S.Ct. 478, 482, 112 L.Ed.2d 474 (1990). "To discern Congress' intent we examine the explicit statutory language and the structure and purpose of the statute." Id. (citing FMC Corp. v. Holliday, ___ U.S. ___, 111 S.Ct. 403, 407, 112 L.Ed.2d 356 (1990)).

The preemptive force of ERISA is explicitly addressed in section 514 of ERISA, 29 U.S.C. § 1144.

Except as provided in subsection (b) of this section, the provisions of ERISA shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan described in ERISA.

ERISA § 514(a), 29 U.S.C. § 1144(a). Subsection (b), inter alia, exempts from the scope of this preemption provision "any law of any State which regulates insurance, banking or securities." ERISA § 514(b), 29 U.S.C. § 1144(b). As explained by the Supreme Court, ERISA's "pre-emption clause is conspicuous for its breadth. It establishes as an area of exclusive federal concern the subject of every state law that `relates to' an employee benefit plan governed by ERISA." FMC Corp., supra, 111 S.Ct. at 407.

Given the far-reaching scope of this preemption clause, courts are regularly faced with preemption defenses to actions purportedly arising under state law, and a wide array of state laws have been held to be preempted by ERISA. See, e.g., Ingersoll-Rand, supra, 111 S.Ct. at 483-85 (Texas law prohibiting termination of employee to avoid pension plan contributions); FMC Corp., supra, 111 S.Ct. at 407-409 (Pennsylvania law eliminating subrogation rights of ERISA regulated plans in actions arising from motor vehicle accidents); Mackey v. Lanier Collection Agency & Service, Inc., 486 U.S. 825, 829-30, 108 S.Ct. 2182, 2185, 100 L.Ed.2d 836 (1988) (provision of Georgia law exempting ERISA regulated plans from garnishment); Metropolitan Life Insurance Co. v. Taylor, 481 U.S. 58, 62, 107 S.Ct. 1542, 1545, 95 L.Ed.2d 55 (1987) (Michigan contract and tort law providing for recovery of benefits under ERISA regulated plan); Pilot Life Insurance Co. v. Dedeaux, 481 U.S. 41, 47-48, 107 S.Ct. 1549, 1552-53, 95 L.Ed.2d 39 (1987) (Mississippi law granting punitive damages for improper processing of benefit claims under ERISA regulated plan); Smith v. Dunham-Bush, Inc., 959 F.2d 6, 10 (2d Cir. 1992) (Connecticut contract and tort law providing for enforcement of oral promise to supplement ERISA regulated plan). In fact, even state laws that supplement, but do not conflict with, ERISA's civil enforcement mechanisms are preempted. See Mackey, supra, 486 U.S. at 829, 108 S.Ct. at 2185.¹

However, the scope of ERISA's preemption clause is not infinite. As explained by the Supreme Court, "some state actions may affect employee benefit plans in too tenuous, remote, or peripheral a manner to warrant a finding that the law `relates to' the plan." Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 100 n. 21, 103 S.Ct. 2890, 2901 n. 21, 77 L.Ed.2d 490 (1983). Thus, certain actions have been held not to be preempted by ERISA. See, e.g., Mackey, supra, 486 U.S. at 825, 108 S.Ct. at 2182 (Georgia garnishment statute of general application); R.R. Donnelley & Sons Co. v. Prevost, 915 F.2d 787, 792-93 (2d Cir.1990) (Connecticut employee benefit plan within statutory ERISA exemption), cert. denied, ___ U.S. ___, 111 S.Ct. 1415, 113 L.Ed.2d 468 (1991); Aetna Life Insurance Co. v. Borges, 869 F.2d 142, 147 (2d Cir.) (Connecticut escheat law), cert. denied, 493 U.S. 811, 110 S.Ct. 57, 107 L.Ed.2d 25 (1989).

B. Subject Matter Jurisdiction over ERISA Preemption Claim

Before the Court can reach the merits of the ERISA preemption claim, however, it must address the threshold issue whether it has subject matter jurisdiction over the instant action. Given the absence of diversity of citizenship, Albradco and Strum assert that the Court has subject matter jurisdiction over this dispute based on the...