Sasso v. Vachris

• Decision Date: 31 December 1984
• Citation: 482 N.Y.S.2d 875,106 A.D.2d 132
• Parties: Robert SASSO, et al., as Trustees of Local 282 Welfare and Pension Trust Funds, Appellants-Respondents, v. Charles F. VACHRIS, Respondent-Appellant, and Anthony Vachris, et al., Respondents.
• Court: New York Supreme Court — Appellate Division

Page 875

482 N.Y.S.2d 875

106 A.D.2d 132

Robert SASSO, et al., as Trustees of Local 282 Welfare and Pension Trust Funds, Appellants-Respondents, v. Charles F. VACHRIS, Respondent-Appellant and Anthony Vachris, et al., Respondents.

Supreme Court, Appellate Division,

Second Department.

Dec. 31, 1984.

Sunshine, Slott & Sunshine, P.C., New York City (Steven R. Miller, New York City, of counsel), for appellants-respondents.

Wikler, Gottlieb, Taylor & Howard, New York City (Richard H. Abelson, New York City, of counsel), for respondent-appellant.

Before TITONE, J.P., and RUBIN, BOYERS and EIBER, JJ.

EIBER, Justice.

The primary issue in the case at bar is whether section 630 of the Business Corporation Law is pre-empted by the Federal Employee Retirement Income Security Act of 1974 (U.S.Code, tit. 29, § 1001 et seq., hereinafter ERISA). We believe section 630, under which the 10 largest shareholders of certain corporations may be held jointly and severally liable for contributions the corporation should have remitted to welfare benefit funds, falls within the Federal pre-emption statute (U.S.Code, tit. 29, § 1144, subd. ), notwithstanding the fact that it does not conflict with the general objectives of ERISA.

The underlying facts are, for the most part, undisputed. Plaintiffs, as trustees of a welfare and pension trust fund established by Local Union 282 which is affiliated with the International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America, sued the shareholders (defendants Charles Vachris, Anthony Vachris and Helen Vachris) and the officers (defendants Charles Vachris, Anthony Vachris and Robert Meschi) of Vacar Construction Corp. (hereinafter Vacar) based upon its failure to pay certain sums into an employee-benefit trust fund established in accordance with collective bargaining and trust agreements. The first cause of action in plaintiffs' complaint is asserted against the shareholders and is grounded upon section 630 of the Business Corporation Law. Section 630 applies to any corporation that is not an investment company registered under the Federal Investment Company Act of 1940 (U.S.Code, tit. 15, § 80a-1 et seq.) and that does not either list its shares on a national securities exchange or regularly quote its shares in an over-the-counter market by a member of a national or an affiliated securities association. Under section 630, joint and several personal liability is imposed upon the 10 largest shareholders of such a corporation for debts, wages or salaries owed to the corporation's employees. Welfare and pension benefits are expressly covered by the statute (Business Corporation Law, § 630, subd. ). The second cause of action in plaintiffs' complaint is asserted against Vacar's officers and is founded upon section 198-c of the Labor Law which imposes criminal penalties upon any employee who is obliged to, inter alia, pay amounts into an employee benefit fund but fails, neglects or refuses to do so within 30 days of when the payments are due (see, also, Labor Law, § 198-a). The statute covers certain officers of a corporate employer (Labor Law, § 198-c, subd. 1) who stand "in such a relation to the corporate affairs that it may be presumed that knew or should have known of and taken some steps to prevent the nonpayment" (People v. Trapp, 20 N.Y.2d 613, 618, 286 N.Y.S.2d 11, 233 N.E.2d 110 ).

The plaintiff trustees moved, inter alia, for summary judgment on both causes of action. Defendants Helen Vachris and Robert Meschi opposed the motion, and defendant Charles Vachris cross-moved for summary judgment. By order dated November 12, 1982, Special Term dismissed the first cause of action but granted summary judgment against Charles Vachris, Anthony Vachris and Robert Meschi on the second cause of action. Plaintiffs appealed and defendant Charles Vachris cross-appealed therefrom. On December 22, 1982 judgment was entered upon the order of Special Term. The right of direct appeal from the order terminated with the entry of the judgment thereon (see Matter of Aho, 39 N.Y.2d 241, 248, 383 N.Y.S.2d 285, 347 N.E.2d 647). However, we have deemed the notices of appeal and cross appeal from the order also to be premature notices of appeal and cross appeal from the judgment (CPLR 5520, subd. ), and have reviewed the propriety of the order on the appeal from the judgment as the former necessarily affected the latter (CPLR 5501, subd. par. 1).

At the outset, the question of State court jurisdiction must be addressed. In regard to the first cause of action, Special Term concluded exclusive jurisdiction rested in the Federal District Courts. Section 1132 (subd. par. ) of title 29 of the United States Code provides:

"Except for actions under subsection (a)(1)(B) of this section, the district courts of the United States shall have exclusive jurisdiction of civil actions under this subchapter brought by the Secretary or by a participant, beneficiary, or fiduciary. State courts of competent jurisdiction and district courts of the United States shall have concurrent jurisdiction of actions under subsection (a)(1)(B) of this section".

Plaintiffs' cause of action is not one under section 1132 (subd. par. cl. ) of title 29 of the United States Code, which pertains to civil actions brought by a participant or beneficiary "to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan". Nor is plaintiffs' cause of action nominally being brought under ERISA.

The parties implicitly agree that similar relief, i.e., holding the 10 largest shareholders of certain corporations personally liable for the corporation's failure to make employees' welfare benefit fund contributions, is not expressly available under ERISA (cf. U.S.Code, tit. 29, § 1132; see, also, U.S.Code, tit. 29, § 1145). The cause of action is not against the corporation as employer. ¹ Rather, the theory upon which the three shareholders are sought to be held is solely predicated on State law and is asserted against persons upon whom ERISA has apparently not imposed personal liability. Hence, we conclude that the New York State Supreme Court had jurisdiction over the first cause of action.

Special Term was also of the view that ERISA pre-empts the remedy accorded by section 630 of the Business Corporation Law. Subdivision (a) of section 514 of ERISA (88 U.S.Stat. 897), the supersedure provision, declares:

"(a) Except as provided in subsection (b) of this section, the provisions of this subchapter and subchapter III of this chapter shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan described in section 1003(a) of this title and not exempt under section 1003(b) of this title. This section shall take effect on January 1, 1975" (U.S.Code, tit. 29, § 1144, subd. ). ²

There is no claim that the employee benefit plans at bar do not fall within the embrace of section 1003 (subd. ) of title 29 of the United States Code or that they are exempt under section 1003 (subd. ) thereof. Nor does subdivision (b) of section 1144 provide an applicable exception with respect to section 630 of the Business Corporation Law. The focus of inquiry thus becomes whether section 630 of the Business Corporation Law impermissibly "relateto" the employee benefit plans for purposes of the Federal supersedure statute. We conclude that it does.

In interpreting the scope of the pre-emption statute, which the Supreme Court has described as being "virtually unique" (Franchise Tax Bd. of the State of California v. Construction Laborers Vacation Trust for Southern California, 463 U.S. 1, ----, n. 26, 103 S.Ct. 2841, 2854, n. 26, 77 L.Ed.2d 420), the Supreme Court has employed a case by case approach. In Alessi v. Raybestos-Manhattan, 451 U.S. 504, 101 S.Ct. 1895, 68 L.Ed.2d 402, the court found a New Jersey statute which prohibited a method of calculating pension benefits that Congress had intended to permit, to be pre-empted pursuant to section 514 (subd. ) of ERISA. Justice MARSHALL's opinion for the court (BRENNAN, J. taking no part) read the supersedure provision as evidence of the intent of Congress "to depart from its previous legislation that 'envisioned the exercise of state regulation power over pension funds' " (Alessi v. Raybestos-Manhattan, supra, p. 523, 101 S.Ct. p. 1906, quoting plurality opinion in Malone v. White Motor Corp., 435 U.S. 497, 512, 514, 98 S.Ct. 1185, 1193, 1194, 55 L.Ed.2d 443) and "to establish pension plan regulation as exclusively a federal concern" (Alessi v. Raybestos-Manhattan, supra, 451 U.S. p. 523, 101 S.Ct. p. 1906). In Alessi the United States Court of Appeals for the Third Circuit had read the relevant legislative history as an indication that "the preemptive intent is just as broad as language suggests" and concluded that "the preemption provision is intended to be read in its normal dictionary sense" (Alessi v. Raybestos-Manhattan, 616 F.2d 1238, 1250 ). In affirming, the Supreme Court observed that it arrived at the same pre-emption conclusion "by a different route" (Alessi v. Raybestos-Manhattan, supra, 451 U.S. p. 524, 101 S.Ct. p. 1906). The Court declared that it "need not determine the outer bounds of ERISA's pre-emptive language to find this New Jersey provision an impermissible intrusion on the federal regulatory scheme" (Alessi v. Raybestos-Manhattan, supra, 451 U.S. p. 525, 101 S.Ct. p. 1907)

Two years later, the Supreme Court undertook a deeper exploration into the outer bounds of section 514 (subd. ) of ERISA in Shaw v. Delta Air Lines, 463 U.S. 85, 103 S.Ct. 2890, 77 L.Ed.2d 490. Under examination in Shaw was the effect of section 514 (subd. ) upon both the Human Rights Law, which prohibited discrimination in employee benefit plans on the basis of pregnancy (Executive Law, § 296, subd. 1, par. see Brooklyn Union Gas Co. v....