ALVARADO et al v. GAYLOR INC. EMPLOYEE TRUST
ORDER ON DEFENDANT'S MOTION TO DISMISS - We GRANT without prejudice 20 Motion to Dismiss Counts I and III of the Amended Complaint, and DENY 20 Motion to Dismiss Count II of the Amended Complaint. See Order for details. Signed by Judge Sarah Evans Barker on 4/20/2017. (LBT)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
NEW ALBANY DIVISION
HARVEY ALVARADO, et al,
GAYLOR INC. EMPLOYEE TRUST,
ORDER ON DEFENDANT’S MOTION TO DISMISS
This matter comes before us on Defendant Gaylor Inc. Employee Trust’s (the
“Trust”) Motion to Dismiss [Dkt. No. 20]. The motion is fully briefed. For the reasons set
forth herein, we GRANT IN PART and DENY IN PART Defendant’s Motion.
Our recitation of facts below is based on the Amended Complaint which is
consistent with the proper procedure as set out in the Federal Rules of Civil Procedure.
Plaintiffs’ response to Defendant’s Motion to Dismiss, Docket Number 24, relies on facts
not contained in the Amended Complaint, including, for example, three affidavits and
certified payroll records. Absent the applicability of one of a few narrow exceptions,
when adjudicating a motion to dismiss our review is limited to the allegations contained
in Plaintiffs’ Amended Complaint. Rosenblum v. Travelbyus.com, Ltd., 299 F.3d 657,
661 (7th Cir. 2002). Accordingly, Plaintiffs cannot defeat Defendants’ Motion by relying
on factual statements not included in the Amended Complaint.
Plaintiffs’ claims against the Trust are based on purported violations of 29 U.S.C.
§ 1001, et seq., the Employee Retirement Income Security Act of 1974 (“ERISA”), and
Kentucky Revised Statutes § 337.505, 1 and Plaintiffs have invoked our federal question
jurisdiction, 28 U.S.C. § 1331 and 29 U.S.C. § 1132(e) (ERISA jurisdictional statute) as
well as supplemental jurisdiction, 28 U.S.C. § 1367.
Plaintiffs were employed by Gaylor, Inc. (“Gaylor”), an electrical contractor.
From 2009 through 2011, Plaintiffs performed work on several Kentucky projects
regulated by the Kentucky “prevailing wage” laws (which have since been repealed).
According to Plaintiffs, they were paid a “prevailing wage” for their work on these
Kentucky projects, which included a basic hourly rate and an additional amount as a
fringe benefit, determined on an hourly rate set by the Commissioner for the
Commonwealth of Kentucky. Pursuant to Kentucky law, an employer’s contribution for
fringe benefits could either be made to a trust, paid in cash to the employee, or some
combination thereof. K.R.S. § 337.505 (repealed January 8, 2017).
In 2009, 2010, and 2011, the Trust received fringe benefit contributions from
Gaylor and administered those contributions. [Amended Complaint (“Am. Compl.”)
¶¶ 20, 22.] No part of the fringe benefit contributions was paid to Plaintiffs in cash, but
instead were all placed into the Trust. [Id. ¶ 23.] It is Plaintiffs’ claim that “the
contributions received by the [Trust] from Gaylor were not fully and properly disbursed
for qualified fringe benefits for Plaintiffs”, in violation of the Trust’s fiduciary duties
The Kentucky prevailing wage law was repealed by the Kentucky legislature on January 9,
under ERISA, 29 U.S.C. § 1104, and KRS § 337.505, and those violations damaged
Plaintiffs.” [Id. ¶¶ 24-27; Dkt. No. 24 (explaining that when the Trust failed to use all of
Gaylor’s contributions to provide fringe benefits for Plaintiffs, it was required to pay out
the unused portions to Plaintiffs in cash, which it did not do).] Plaintiffs also contend that
the Trust violated ERISA, 29 U.S.C. § 1132(c), by refusing to supply information
requested by Plaintiffs related to fringe benefit contributions. It is unclear from the
Amended Complaint the date on which Plaintiffs requested said information from the
Trust or what specific information they sought.
Plaintiffs’ claims are limited to contributions made “prior to January 2011.” [Am.
Comp. ¶ 32 (“[P]rior to January, 2011, Defendant [Trust] did not properly use the fringe
benefit contributions paid by Gaylor to provide qualified benefits to Plaintiffs.”).] It is
unclear from the Amended Complaint when Plaintiffs became aware of the Trust’s
alleged failure to properly use the fringe benefit contributions; however, Plaintiffs explain
in their response to Defendant’s Motion to Dismiss that they first were suspicious of a
problem in January, 2011 [Dkt. No. 24 at 2].
Plaintiffs have brought three claims against the Trust: ERISA – Breach of
Fiduciary Duties; ERISA – Refusal To Supply Requested Information; and Violations of
Kentucky Revised Statute § 337.505. In Count I, Plaintiffs contend that the Trust
“breached its fiduciary duties under 29 U.S.C. § 1104 by not properly using fringe benefit
contributions to provide qualified fringe benefits for Plaintiffs in accordance with the
Kentucky prevailing wage laws.” [Am. Compl. ¶ 39.] Count II of their Amended
Complaint alleges that the Trust “violated 29 U.S.C. § 1132(c) by refusing to supply
requested information about the fringe benefit contributions.” [Id. ¶ 42.] Plaintiffs also
assert a claim based on state law in Count III alleging that the Trust “failed to expend the
full fringe benefit contributions it received from Gaylor to provide qualified fringe
benefits to Plaintiffs,” in violation of Kentucky Revised Statute § 337.505.
The Trust seeks to dismiss this case in its entirety because no ERISA claims have
been asserted; Plaintiffs’ claims, according to Defendant, are rooted in a violation of
Kentucky prevailing wage laws and not ERISA; therefore, this court lacks jurisdiction.
Further, the Trust argues that Plaintiffs’ second claim (breach of failure to disclose
information) is barred by the statute of limitations. Without federal causes of action, the
Trust contends that we lack supplemental jurisdiction over Plaintiffs’ state law claims.
The Trust also contends that Count III, based on a violation of Kentucky statutory law,
fails to state a claim upon which relief can be granted.
Standard of Review
“To survive a motion to dismiss, a complaint must contain sufficient factual
matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft
v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)).
“Threadbare recitals of the elements of a cause of action, supported by mere conclusory
statements, do not suffice” to withstand the requirements of Federal Rules of Civil
Procedure 8 and 12(b)(6). Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 555). “[A]t
some point, the factual detail in a complaint may be so sketchy that the complaint does
not provide the type of notice of the claim to which the defendant is entitled under Rule
8.” Airborne Beepers & Video, Inc. v. AT & T Mobility LLC, 499 F.3d 663, 667 (7th Cir.
2007); Killingsworth v. HSBC Bank Nevada, N.A., 507 F.3d 614, 618 (7th Cir. 2007) (A
statement of the claim must be sufficient “to give the defendant fair notice of what the . . .
claim is and the grounds upon which it rests.”).
A party moving to dismiss nonetheless bears a weighty burden. “[O]nce a claim
has been stated adequately, it may be supported by showing any set of facts consistent
with the allegations in the complaint.” Twombly, 550 U.S. at 563 (citing Sanjuan v. Am.
Bd. of Psychiatry and Neurology, Inc., 40 F.3d 247, 251 (7th Cir. 1994) (“At [the
pleading stage] the plaintiff receives the benefit of imagination, so long as the hypotheses
are consistent with the complaint.”)). In addressing a Rule 12(b)(6) motion, we treat all
well-pleaded factual allegations as true, and we construe all inferences that reasonably
may be drawn from those facts in the light most favorable to the non-movant. Lee v. City
of Chicago, 330 F.3d 456, 459 (7th Cir. 2003); Szumny v. Am. Gen. Fin., 246 F.3d 1065,
1067 (7th Cir. 2001).
Count I of the Amended Complaint consists of a single, substantive paragraph, as
The Gaylor Trust breached its fiduciary duties under 29 U.S.C. § 1104
by not properly using the fringe benefit contributions to provide qualified
fringe benefits for Plaintiffs in accordance with the Kentucky prevailing
The Trust contends that Count I of the Amended Complaint must be dismissed because
Plaintiffs’ claim is an attempt to enforce the Kentucky prevailing wage laws under the
guise of ERISA.
The purpose of ERISA, generally, is to protect the interests of the participants of
employee benefit plans through required reporting and establishing standards of conduct
and obligations for fiduciaries of ERISA plans and providing mechanisms to obtain relief
for violations of ERISA duties and obligations. See 37 U.S.C. § 1001. In furthering that
purpose in a uniform way, ERISA preempts state laws “to the extent that those laws
‘relate to any employee benefit plan.’” Moran v. Rush Prudential HMO, Inc., 230 F.3d
959, 968 (7th Cir. 2000) (quoting UNUM Life Ins. Co. of Am. v. Ward, 526 U.S. 358, 363
(1999) (quoting 29 U.S.C. § 1144(a)). Therefore, argues the Trust, if Kentucky’s
prevailing wage statute is preempted by ERISA, no claim is available under Kentucky
law for wrongful conduct related to an employee benefit plan; rather, ERISA applies.
Likewise, if state law is not preempted, then, by definition, the state law claim must be
unrelated to employee benefit plans and thus does not overlap the ERISA claim.
The parties agree that Kentucky’s prevailing wage statute is not preempted by
ERISA, thereby conceding that two separate, non-overlapping laws are in effect and are
enforceable. [See, e.g., Dkt. No. 21 at 6-7 (string citation of circuit court rulings that
ERISA does not preempt state prevailing wage laws); Dkt. No. 24 at 4 (“Plaintiffs agree
with Defendant that their state law claims are not pre-empted be ERISA.”).] Since that is
the case, Plaintiffs are entitled to pursue a state law claim based on a violation of the
Kentucky prevailing wage statute (as they allege in Count III) and a claim based on a
violation of ERISA; those claims are independent of one another. We next address,
therefore, whether Count I of Plaintiffs’ Amended Complaint asserts a claim for violation
of ERISA or a claim for violation of Kentucky’s prevailing wage statute under the guise
of an ERISA claim.
As pled, Count I requires an interpretation and application of Kentucky’s
prevailing wage statute (which claim is repeated in Count III, and is also subject to
dismissal). Arguing that the Trust’s ERISA-based fiduciary duties include a duty to
comply with Kentucky law, Plaintiffs defend their claim, as follows:
Since Gaylor, Inc. paid a specified hourly amount to the Gaylor Trust to
satisfy Gaylor, Inc.’s obligations under Kentucky law, the Gaylor Trust’s
fiduciary duties to Plaintiffs included compliance with Kentucky law in its
use of contributions made on behalf of each Plaintiff to provide fringe
benefits for that Plaintiff.
[Dkt. No. 24 at 5.] Plaintiffs provide no authority, and we are aware of none, to support
their contention that by violating the Kentucky prevailing wage statute, the Trust ipso
facto violated ERISA. 2 We reject Plaintiffs’ attempt to secure ERISA relief through the
back door by alleging a state-law claim that is couched in terms of ERISA’s fiduciary
duty requirements. To hold otherwise would defeat the purpose of ERISA to establish
uniform standards and obligations for fiduciaries of ERISA plans in that it would permit
Plaintiffs’ reliance on Gomez v. Rossi Concrete, Inc., 270 F.R.D. 579 (C.D. Cal. 2010) is
misplaced. [See Dkt. No. 24 at 6.] In that case, the plaintiffs filed separate ERISA claims for
breach of fiduciary duties relevant to the three ERISA plans on the grounds that their employer
failed to make sufficient contributions to the plans, misstated the amount of contributions owed,
and kept plan assets to themselves. Gomez, 270 F.R.D. at 583-84. The plaintiffs also filed statelaw prevailing wage claims which, as best as we can tell from the opinion, were separate claims
unrelated to ERISA or any fiduciary duty. Thus, Gomez is clearly inapposite.
the incorporation of each state’s laws into ERISA-defined duties. To assert a claim that
the Trust violated ERISA, Plaintiffs must cast it as a violation of ERISA; Count I of the
Amended Complaint does not state such a claim.
Because Plaintiffs have failed to state a claim upon which relief can be granted,
we GRANT the Trust’s Motion to Dismiss Count I of Plaintiffs’ Amended Complaint.
Count II of Plaintiffs’ Amended Complaint advances their claim that the Trust
allegedly violated ERISA (29 U.S.C. § 1132(c)) by failing to provide them with
requested information about fringe benefit contributions. 3 The Trust moves to dismiss
this claim based on the applicable statute of limitations.
If a plaintiff alleges facts sufficient to establish a statute of limitations defense,
effectively pleading herself out of court, a federal complaint can be dismissed under Rule
12(b)(6). Hollander v. Brown, 457 F.3d 688, 691 n.1 (7th Cir. 2006) (although the
expiration of the statute of limitations is an affirmative defense, “[d]ismissal under Rule
12(b)(6) on the basis of a limitations defense may be appropriate when the plaintiff
effectively pleads herself out of court by alleging facts that are sufficient to establish the
defense.”) (internal citations omitted).
We note that in their Amended Complaint Plaintiffs allege their requests for information were
made to Gaylor (their employer) and not the Trust. [Am. Compl. ¶¶ 36-37.] Gaylor is not a
defendant in this case. In their Response Brief, Plaintiffs attempt to establish an agency
relationship between Gaylor and the Trust; however, they did not allege such in the Amended
Complaint. [See Dkt. No. 24 at 7 (“As demonstrated by the affidavits . . . their efforts to obtain
the information were thwarted by Gaylor, Inc. and thus by the Trust, by the refusal to respond to
these requests.”)] This agency relationship theory will be tested in future briefing, we assume.
The Trust seeks to dismiss Count II on statute of limitations grounds because
“Plaintiffs’ First Amended Complaint alleges that their requests for information were
made in January 2011.” [Dkt. No. 21 at 9 (citing Am. Compl. ¶¶ 36-37).] The Trust’s
characterization of Plaintiffs’ allegations, however, is inaccurate. Plaintiffs actually
Some Plaintiffs attempted to ask Gaylor about the fringe benefits
issues to which they had become altered [sic] after January, 2011.
Management personnel at the jobsite were asked, but were unable to obtain
answered [sic] to these inquiries. One Plaintiff called the Gaylor home
offices, but was not permitted to speak with anyone there about the fringe
This information was available to Gaylor from the Gaylor Trust, but
was intentionally concealed from Plaintiffs, thereby preventing them from
learning that the required fringe benefit contributions had not been fully used
for their respective benefits.
Plaintiffs contend that they were alerted to the “fringe benefit issues” sometime
after January, 2011. They did not allege, as the Trust maintains, that their requests for
information were made in January 2011. As oft-repeated, a motion to dismiss requires
that we accept as true all factual allegations in the complaint and draw all reasonable
inferences in the non-movant’s favor. Thus, we conclude that Plaintiffs have not pled that
their requests were made in January 2011 and therefore have not pleaded themselves out
of court. Discovery may prove otherwise, but for now this claim survives.
Accordingly, we DENY the Trust’s Motion to Dismiss Count II. 4
Plaintiffs submit three affidavits allegedly evincing “their efforts to obtain the information
[that] were thwarted by Gaylor, Inc. and thus by the Trust, by the refusal to respond to these
requests.” [Dkt. No. 24 at 7.] The Trust’s submission of and reliance on evidence beyond the
Plaintiffs allege in Count III of their Amended Complaint that the Trust violated
Kentucky’s prevailing wage statute by “fail[ing] to expend the full fringe benefit of
contributions it received from Gaylor to provide qualified fringe benefits to Plaintiffs.”
[Am. Compl. ¶ 46; id. ¶ 47 (alleging that the Trust’s “actions were intentional, willful and
in reckless disregard of Plaintiffs’ rights as protected by KRS § 337.505 et seq.”).] The
Trust seeks dismissal of this claim on the ground that it is not subject to the prevailing
wage statute. 5
In general, prevailing wage laws apply to contractors and subcontractors of public
works projects requiring them to pay laborers and mechanics the prevailing wage in the
locality where the project is to be performed. These types of laws require contractors
engaged in public construction to pay at least the same wage rates they would be
expected to pay if engaged in nonpublic construction in the same community. 64 Am. Jur.
2d Public Works and Contracts § 213.
As a preliminary matter, we note that the sole defendant in this case is the Trust;
not Plaintiffs’ employer, Gaylor, Inc. In their Amended Complaint Plaintiffs allege that,
allegations of the Amended Complaint beyond the proper scope of a response to a motion to
dismiss. See Rosenblum, 299 F.3d at 661.
The Trust also argues that we lack subject matter jurisdiction over Count III because, had we
granted its motion with respect to Counts I and II, there would be no federal claims upon which
to base supplemental jurisdiction. Because we denied the Trust’s motion to dismiss Count II and
we dismiss Count III on other grounds, we need not discuss whether we should decline
supplemental jurisdiction in these circumstances.
“[a]s that term is defined by KRS 337.010(1)(e), 6 Plaintiffs were at all times relevant to
this action ‘employees’ of Gaylor” and also allege that Gaylor is a “contractor” as defined
by Kentucky’s prevailing wage law, meaning that it is “in charge of the employment or
payment of the employees . . . who are employed in performing the work to be done . . .
under the particular contract with any public authority.” [Am. Compl. ¶¶ 14-15; KRS
§ 337.010(3)(b) (2010).] The Trust is not identified as an employer or contractor under
Kentucky’s prevailing wage statute and is not alleged to have been the Plaintiffs’
Kentucky’s since-repealed prevailing wage statute on its face applied to
employers. Plaintiffs specifically point to KRS § 337.505 in their Count II which defined
“prevailing wage” in relevant part as:
(2) An additional amount per hour equal to the hourly rate of contribution
irrevocably made or to be made by an employer on behalf of employees
within each classification of construction to a trustee or to a third person
pursuant to an enforceable commitment to carry out a financially responsible
plan or program, which was communicated in writing to the employees
affected, for the following fringe benefits . . . but only where the employer is
not required by other federal, state or local law to provide any of such
benefits: provided, said additional amount may, at the discretion of the
employer, be paid either in cash to the employee or by contributions for fringe
benefits, or partly in cash and partly by such contributions, it being the
intention of this subsection to recognize fringe benefits as a part of the
prevailing wage rate where made in accordance with this subsection.
Kentucky’s prevailing wage statute defined “employee” as “any person employed by or
suffered or permitted to work for an employer.” KRS § 337.010(1)(e). That same statute defined
“employer” as “any person, either individual, corporation . . . who employs an employee and
includes any person . . .acting directly or indirectly in the interest of an employer in relation of an
employee.” Id. § 337.010(1)(d). Plaintiffs do not allege that the Trust is an employer under this
definition or that they are employees of the Trust.
Ky. Rev. Stat. Ann. § 337.505 (emphasis added). The plain language of Kentucky’s
prevailing wage statute therefore applies to employers, not the trust in which fringe
benefit contributions are placed. This makes sense under the circumstances of this case,
where it was the employer making contributions for fringe benefits, not the Trust.
Plaintiffs did not respond to the Trust’s request for dismissal on this basis.
Accordingly, we GRANT the Trust’s Motion to Dismiss Count III of the Amended
For the foregoing reasons, we GRANT WITHOUT PREJUDICE Defendant’s
Motion to Dismiss Counts I and III of the Amended Complaint, and DENY Defendant’s
Motion to Dismiss Count II of the Amended Complaint.
SARAH EVANS BARKER, JUDGE
United States District Court
Southern District of Indiana
David T. Andrews
ANDREWS LAW LLC
H. Edwin Bornstein
BORNSTEIN & BORNSTEIN PSC
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?