Trustees of Empire State Carpenters Annuity, Apprenticeship, Labor-Management Cooperation, Pension and Welfare Funds v. John J. Pausley, Inc. et al
MEMORANDUM & ORDER denying 10 Motion to Dismiss; denying 10 Motion to Dismiss for Lack of Jurisdiction; denying 10 Motion to Dismiss for Failure to State a Claim; For the foregoing reasons, Defendants' motion to dismiss is DENIED. So Ordered by Judge Joanna Seybert on 6/16/2014. C/ECF (Valle, Christine)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
TRUSTEES OF EMPIRE STATE CARPENTERS
ANNUITY, APPRENTICESHIP, LABORMANAGEMENT COOPERATION, PENSION
AND WEFARE FUNDS,
MEMORANDUM & ORDER
-againstJOHN J. PAUSLEY, INC. and TERRY
BAILEY CONSTRUCTION INC.,
Charles R. Virginia, Esq.
Nathan V. Bishop, Esq.
Michael Bauman, Esq.
Virginia & Ambinder LLP
111 Broadway, Suite 1403
New York, NY 10006
Carla McKain, Esq.
McKain Law, PLLC
136 E State Street
Ithaca, NY 14850
SEYBERT, District Judge:
Currently pending before the Court is defendants John
“Defendants”) motion to dismiss.
For the following reasons,
Defendants’ motion is DENIED.
Plaintiffs Trustees of Empire State Carpenters Annuity,
Apprenticeship, Labor-Management Cooperation, Pension and Welfare
Funds (“Plaintiffs” or “Trustees”) commenced this action on March
26, 2013 pursuant to Sections 502(a)(3) and 515 of the Employee
Retirement Income Security Act of 1974 (“ERISA”), as amended 29
Management Relations Act of 1947 (“LMRA”), as amended, 29 U.S.C.
§ 185; and Section 9 of the Federal Arbitration Act (“FAA”), 9
Arbitrator’s Award (the “Award”).
Carpenters Annuity, Apprenticeship, Pension and Welfare Funds and
of the Empire State Carpenters Labor Management Cooperation Fund
(together, the “Funds”).
(Compl. ¶¶ 4-5.)
Pausley and Bailey
Construction are New York corporations and employers within the
meaning of Section 3(5) of ERISA.
(Compl. ¶¶ 6-7.)
allege was rendered pursuant to a collective bargaining agreement
(“CBA”) between Northeast Regional Council of Carpenters f/k/a
the Empire State Regional Council of Carpenters (the “Union”) and
(Compl. ¶ 1.)
The CBA requires Pausley to, inter alia,
make periodic contributions to the Funds, submit periodic reports
to the Funds, and to furnish its books and records when requested
by the Funds for an audit.
(Compl. ¶ 9.)
an audit of Pausley pursuant to the CBA covering the period of
January 2007 through December 2010.
(Compl. ¶ 10.)
determined that Pausley failed to report and make contributions
in the principal amount of $86,045.20.
(Compl. ¶ 10.)
Pausley failed to remit the contributions uncovered by the audit,
a dispute arose, which was then submitted to arbitration pursuant
to a clause in the Funds’ collection policy (the “Collection
(Compl. ¶¶ 11-12.)
Pierson issued a written determination finding that Pausley was
in violation of the terms of the CBA and ordering Pausley to pay
the Funds $149,235.28, consisting of contributions of $86,045.20,
auditing fees of $3,570.20, attorneys’ fees of $920.00, and the
arbitrator’s fee of $750.00.
(Compl. ¶¶ 13-14.)
In October 2012, Pausley’s owner, Terry Bailey, began
operating Bailey Construction.
(Compl. ¶ 15.)
that Pausley and Bailey Construction are both owned and managed
customers, and/or supervision (Compl. ¶ 17); operate at the same
location (Compl. ¶ 18); and share common employees who perform
Terry Bailey created Bailey Construction and
customers, operations and business to Bailey
transaction for the purpose of evading
Pausley’s obligations to the Funds under the
CBA, including Pausley’s obligation to pay
the Funds the amounts found in the audit
covering the period January 2007 through
(Compl. ¶ 20.)
Plaintiffs seek to confirm the arbitration award and
Defendants now move to dismiss Plaintiffs’ Complaint
for lack of subject matter jurisdiction pursuant to Federal Rule
of Civil Procedure 12(b)(1) and failure to state a claim pursuant
The Court will first address the applicable legal
standards before turning to Defendants’ motion more specifically.
I. Legal Standards
matter jurisdiction under Rule 12(b)(1) when the district court
lacks the statutory or constitutional power to adjudicate it.”
Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000).
See Morrison v. Nat’l Australia Bank, Ltd., 547 F.3d
167, 170 (2d Cir. 2008).
The Court must accept as true the
factual allegations contained in the complaint, but it will not
subject matter jurisdiction must be shown affirmatively.
id.; Atlanta Mut. Ins. Co. v. Balfour Maclaine Int’l Ltd., 968
F.2d 196, 198 (2d Cir. 1992); Shipping Fin. Servs. Corp. v.
Drakos, 140 F.3d 129, 131 (2d Cir. 1998).
“A plaintiff asserting
preponderance of the evidence that it exists.”
F.3d at 113.
In deciding Rule 12(b)(6) motions to dismiss, the Court
applies a “plausibility standard,” which is guided by “[t]wo
Ashcroft v. Iqbal, 556 U.S. 662, 678, 129
S. Ct. 1937, 173 L. Ed. 2d 868 (2009); accord Harris v. Mills,
572 F.3d 66, 71-72 (2d Cir. 2009).
First, although the Court
“inapplicable to legal conclusions;” thus, “[t]hreadbare recitals
conclusory statements, do not suffice.”
accord Harris, 572 F.3d at 72.
Iqbal, 556 U.S. at 678;
Second, only complaints that
state a “plausible claim for relief” can survive a Rule 12(b)(6)
motion to dismiss.
Iqbal, 556 U.S. at 679.
a complaint does so is “a context-specific task that requires the
reviewing court to draw on its judicial experience and common
Id.; accord Harris, 572 F.3d at 72.
II. Subject Matter Jurisdiction
Defendants first argue that neither ERISA nor the FAA
counters that subject matter jurisdiction is appropriate under
both ERISA and the LMRA.
The Court agrees with Plaintiff that it
has jurisdiction pursuant to the LMRA.
commerce . . . may be brought in any district court of the United
States having jurisdiction of the parties . . . .”
29 U.S.C. §
If the resolution of a state law claim requires the
principles must be employed to resolve the dispute.
v. Norge Div. of Magic Chef, Inc., 486 U.S. 399, 405-06, 108 S.
Ct. 1877, 100 L. Ed. 2d 410 (1988).
federal courts have jurisdiction to confirm arbitration awards.
Miller Floor Covering, Inc., No. 12-CV-5660, 2013 WL 5366962, at
*5 (E.D.N.Y. Sept. 24, 2013) (holding that Section 301 of the
LMRA provided subject matter jurisdiction over trustees’ suit to
confirm an arbitration award); Trs. of Empire State Carpenters
Annuity, Apprenticeship, Labor Mgmt. Coop., Pension & Welfare
0040(JS)(WDW), 2013 WL 4807110, at *3 (E.D.N.Y. Sept. 9, 2013)
(same); Trs. of the Sheet Metal Workers Int’l Assoc. Local No. 38
Vacation Fund v. Katonah Roofing, Inc., Nos. 10-CV-1619, 11-CV8185, 2011 WL 9010113, at *7 (S.D.N.Y. Sept. 4, 2011) (“Federal
courts have jurisdiction to confirm labor arbitration awards.”).
Here, Defendants assert that the Arbitration Award was
Rather, Plaintiffs claim that the Award was proper due to a
clause within the Collection Policy, which is attached to the
Trust Agreements rather than the CBA.
(Defs.’ Reply Br. at 2.)
This raises a potential issue because Pausley was a signatory to,
Notably, Pausley participated in the arbitration proceedings
without objection. It is possible for a party to waive its
ability to contest the viability of an arbitration award. See
Katanah Roofing, Inc., 2011 WL 9010113, at *7 (noting the general
rule that, under New York law, one has ninety days to modify or
vacate an award or the affirmative defense will be barred
(citations omitted)). There is an exception, though, where the
“defendant is a ‘non-signatory’ to the relevant agreement
purporting to grant the plaintiff the right to arbitrate a
dispute.” Trs. of Int’l Union of Operating Engineers Local 30
Benefits Funds v. Nyack Hosp., 975 F. Supp. 2d 365, 375 (S.D.N.Y.
and indisputably bound by, the CBA.
The Trust Agreement and
Collection Policy, though, are separate documents from the CBA.
See AT&T Techs., Inc. v. Commc’ns Workers of Am., 475 U.S. 643,
648, 106 S. Ct. 1415, 89 L. Ed. 2d 648 (1986) (“[A]rbitration is
a matter of contract and a party cannot be required to submit to
arbitration any dispute which he has not agreed so to submit.”
while typically there is a presumption of arbitrability in a
dispute between an employer and a union arising from a CBA, this
employer and trustees.
See N.Y. City Dist. Council of Carpenters
Steelworkers of Am. v. Warrior & Gulf Navigation Co., 363 U.S.
574, 582-83 (1960) and Schneider Moving & Storage Co. v. Robbins,
466 U.S. 364, 371-73 (1984)).
In Nyack Hospital, for example, it was undisputed that
975 F. Supp. 2d at 366.
against the defendant employer.
There, the trustees
Like the case at hand, the
arbitration award invoked the CBA as the source of authority for
Id. at 367.
The Court noted that something was
“amiss” in that Trust Agreement and Collection Policy were the
true sources of any potential arbitration authority.
Id. at 368-
Thus, the Court stated that “Defendant is not a party to
either of those documents, and the law in the Second Circuit is
that an employer is not bound by non-essential provisions of plan
documents not signed by the employer that pays into a fund.”
It would seem, then, that the logical inquiry would be
to consider whether the provisions at issue in this case are
essential such that Defendants are bound by them.
is a significant difference between Nyack Hospital and this case.
In Nyack Hospital, it was undisputed that the defendant was not a
signatory to the Trust Agreement and the trustees asserted that
defendants were bound by the Trust Agreement because it made
contributions to a benefit fund pursuant to the CBA.
entire Trust Agreement.
Id. at 369-70.
incorporated by reference.
Id. at 369.
Here, in contrast, the
(Defs.’ Reply Br. at 2 (“Acceptance
contractors to the Trust Agreements and Amendments thereto under
which the funds are operating and shall be considered a part of
this Agreement in the same manner as if fully set forth herein.”
(citing the CBA)).)
Where that is the case, federal courts have
See Dodge Hyundai of Paramus v. United
Welfare Fund, Welfare Div., No. 11-CV-0979, 2011 WL 4356373, at
*3 (E.D.N.Y. Sept. 16, 2011) (“While the court finds that the CBA
itself does not confer a right to compel arbitration on the Funds
because they are non-parties, the court finds that the terms of
the Trust Agreement to which both parties . . . are bound . . .
delinquent contribution disputes.”); TADCO Const. Corp., 2008 WL
540078, at *1 (exercising jurisdiction where the Trust Agreement
reference into the CBA”); cf. Concourse Vill., Inc. v. Serv.
Emps. 23J N. Health Ben. Fund, No. 11-CV-7824, 2012 WL 5462662,
at *8 (S.D.N.Y. Nov. 8, 2012) (distinguishing cases where the
trust agreement was explicitly incorporated by reference into the
Defendants raise an additional argument that the Trust
Agreement to which Plaintiffs cite as the basis for arbitration
is dated March 6, 2012, but that the contributions that were
delinquent occurred between January 1, 2007 and December 31,
Plaintiffs’ contention that the Trust Agreement and Collection
Policy, which supplied the basis for arbitration, were effective
during the relevant time.
Such questions involve an analysis of
the CBA in conjunction with the Trust Agreement and Collection
consultation or reference to the CBA, subject matter jurisdiction
is proper under the LMRA.
See Massa Const. Inc. v. Empire State
Carpenters Fringe Benefits Funds, No. 12-CV-6405(JS)(AKT), 2013
WL 4780957, at *4 (E.D.N.Y. Sept. 4, 2013).
Accordingly, Defendants’ motion to dismiss for lack of
subject matter jurisdiction is DENIED.
II. Failure to State a Claim
failed to state a claim because: (1) “The Complaint and Documents
Confirming the Collection Award against Pausley” (Defs.’ Br.,
Docket Entry 10-1, at 10); and (2) “The Complaint is Facially
Insufficient with Regard to Allegations that Defendant Bailey
Constructions is the Alter Ego of Pausley” (Defs.’ Br. at 13).
The Court will address each of these arguments in turn.
A. As Against Pausley
Defendants’ argument regarding the insufficiency of the
Complaint as against Pausley primarily reiterates their assertion
that the CBA does not provide for arbitration and that the Funds
are only third-party beneficiaries of the CBA.
In other words,
their argument circles back to the general premises asserted
previously that arbitration is a matter of contract, therefore
arising out of the CBA does not apply to Funds as third-party
Defendants go on to maintain that the Collection
Policy effective October 2010 also did not mention arbitration.
(Defs.’ Br. at 12.)
Thus, they conclude that “[w]here, as here,
Plaintiffs seek to confirm an arbitration award that was rendered
without the parties agreeing to use arbitration in the CBA, the
Complaint should be dismissed under Rule 12(b)(6).”
Defendants do not cite any case law for their final
Notably, “confirmation of an arbitration award is a
summary proceeding that merely makes what is already a final
arbitration award a judgment of the court, and the court must
D.H. Blair & Co., Inc. v. Gottdiener, 462 F.3d 95,
Thus, district courts have limited judicial review.
Katonah Roofing, Inc., 2011 WL 9010113, at *7.
plaintiff’s petition to confirm the result of the arbitration,
the Court need only ensure that the arbitrator had some grounds
on which to grant the damages spelled out in the Award.”
Ornamental & Reinforcing Iron Workers Emp. Benefit Funds v. Gen.
Fence Corp., No. 13-CV-6005, 2014 WL 1800428, at *6 (E.D.N.Y. May
5, 2014) (internal quotation marks and citation omitted).
a barely colorable justification for the outcome reached by the
arbitrators is necessary to confirm the award.”
D.H. Blair, 462
F.3d at 110 (internal quotation marks and citation omitted).
The foregoing principles suggest that the Complaint, or
petition, does not need to contain very much in order to confirm
an arbitration award.
Here, Defendants argue that the CBA and
Trust Agreement do not adequately support confirmation.
arguments, however, appear to be reasons why this Court should
not confirm the arbitration award or perhaps even for vacatur;
they cannot appropriately be categorized as a failure to state
claim under Rule 12(b)(6).
While Defendants’ assertions may very
well have merit, they will be addressed as part of the summary
proceedings attendant to actions to confirm an arbitration award
Defendants’ motion in this respect is DENIED.
B. As Against Bailey Construction
liability against Bailey Construction.
The Court disagrees.
pierce the corporate veil: (1) the parent must exercise complete
domination in respect to the transaction attacked, and (2) such
domination must have been used to commit fraud or wrong against
the plaintiff, which proximately caused the plaintiff’s injury.”
Sysco Food Serv. of Metro N.Y., LLC v. Jekyll & Hyde, Inc., No.
08-CV-2958, 2009 WL 4042758, at *2 (S.D.N.Y. Nov. 17, 2009).
“The hallmarks of the alter ego doctrine include ‘whether the two
Truck Drivers Local Union No. 807 v. Reg’l Import &
Export Trucking, Co., 944 F.2d 1037, 1046 (2d Cir. 1991) (quoting
Goodman Piping Products, Inc. v. NLRB, 741 F.2d 10, 11 (2d Cir.
1984) (per curiam)).
manages both Pausley and Baily Construction, that both businesses
operate out of the same location, and that they share employees,
identical business purposes, operations, office staff, equipment,
customers and/or supervision.
(Compl. ¶¶ 16-19.)
the Complaint asserts that Mr. Bailey created Bailey Construction
and made relevant transfers in order to evade his obligations
under the CBA.
(Compl. ¶ 20.)
While Defendants assert that the
allegations are conclusory and lack factual support, the Court
finds that Plaintiffs have alleged enough to overcome a motion to
Apprenticeship v. Syracuse Floor Sys., Inc., No. 13-CV-1509, 2013
allegations, even where lean, were sufficient to state an alter
ego claim (citation omitted)); Trs. of the Hollow Metal Trust
Fund v. FHA Firedoor Corp., No. 12-CV-7069, 2013 WL 1809673, at
*4 (S.D.N.Y. Apr. 30, 2013) (denying motion to dismiss where
plaintiffs “summarily pleaded each of” the factors of the alter
ego test); Network Enters., Inc. v. APBA Offshore Prods., Inc.,
No. 01-CV-11765, 2003 WL 124521, at *3 (S.D.N.Y. Jan. 15, 2003)
understandably sparse, are sufficient to survive a motion to
Corporation is another iteration of Pausley, designed simply to
track the relevant factors, are not simply legal conclusions.
See Trs. of the Mosaic & Terrazzo Welfare Pension, Annuity &
Vacation Funds v. Cont’l Floors, Inc., No. 13-CV-1739, 2013 WL
5637492, at *6 (E.D.N.Y. Oct. 15, 2013).
This does not the end of the inquiry, however.
general matter, “an action for confirmation is not the proper
time for a District Court to ‘pierce the corporate veil’” given
the complex and fact-intensive inquiry involved.
& Trading Co. v. E. States Petroleum Corp. of Panama, S.A., 312
F.2d 299, 301 (2d Cir. 1963); see also Productos Mercantiles E
Industriales, S.A. v. Faberge, USA, Inc., 23 F.3d 41, 47 (2d Cir.
Thus, courts typically consider alter ego claims only
considerable delay. 2
See Productos Mercantiles E Industriales,
S.A., 23 F.3d at 47; Daebo Int’l Shipping Co., Ltd. v. Americas
Bulk Transport (BVI) Ltd., No. 12-CV-4750, 2013 WL 2149591, at *4
(S.D.N.Y. May 17, 2013).
However, courts have also recognized an exception in
the context of labor disputes.
See Gvozenovic v. United Air
Lines, Inc., 933 F.2d 1100, 1105 (2d Cir. 1991).
Thus, where the
arbitration arose out of a collective bargaining relationship,
consideration of an alter ego theory is appropriate.
of Arbitration Between Bowen & 39 Broadway Assocs., No. 91-CV4673, 1992 WL 73480, at *8 (S.D.N.Y. Apr. 2, 1992) (“While the
issue is raised in the context of a motion to confirm, the Orion
rule against considering such matters is not applicable because
the underlying arbitration arose out of a collective bargaining
Accordingly, courts in contexts similar to the
case at hand have seemed to allow some level of discovery to
determine alter ego.
See, e.g., Trs. of N.Y. City Dist. Council
of Carpenters Pension Fund v. Integrated Structures Corp., No.
(deciding alter ego status in a case involving confirmation of an
arbitration award for unpaid contributions where the record made
Here, although Defendants argue that discovery will be
necessary, they raise this argument for the first time in their
reply brief and, in any event, do not explain why this case would
involve a particularly complex factual inquiry or extensive
such a determination clear); Int’l Broth. of Teamsters, Local No.
264 v. Nason’s Delivery, Inc., No. 11-CV-0186, 2011 WL 3862322,
defendants could conduct discovery on certain issues, including
alter ego liability).
alter ego claim against Bailey Construction is DENIED and the
dismiss is DENIED.
/s/ JOANNA SEYBERT____________
Joanna Seybert, U.S.D.J.
June 16, 2014
Central Islip, New York
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