Local #1674 of Howard Mental Health v. HowardCenter, Inc.

Filing 34

OPINION AND ORDER denying as moot 5 Motion to Dismiss for Failure to State a Claim; granting 22 Motion to Remand to State Court for Lack of Subject Matter Jurisdiction. Signed by Judge William K. Sessions III on 8/27/2014. (law)

UNITED STATES DISTRICT COURT
FOR THE
DISTRICT OF VERMONT
LOCAL #1674 OF HOWARD MENTAL
HEALTH, A SUBORDINATE BODY OF
COUCIL 93 OF THE AMERICAN
FEDERATION OF STATE, COUNTY
AND MUNICIPAL EMPLOYEES
AFL-CIO a/k/a AFSCME LOCAL
#1674,
Plaintiff,
v.
HOWARDCENTER, INC.,
Defendant.

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Case No. 2:14-cv-67

OPINION AND ORDER
Plaintiff Local #1674 of Howard Mental Health (“the Union”)
brings this action against Defendant HowardCenter, Inc.
(“HowardCenter”) for its alleged failure to properly apply state
Medicaid funds.

The Union submits that the state appropriations

included a specific directive that they were to be paid to the
employees represented by the Union, and brings claims of unjust
enrichment, breach of trust, and conversion under Vermont law.
This action was originally filed in state court and Defendant
removed, asserting that because Plaintiff is a union operating
under a Collective Bargaining Agreement (“CBA”) with Defendant,
the state action is completely preempted and displaced by

Section 301 of the Labor Management Relations Act (“LMRA”), 29
U.S.C. § 185.
Plaintiff has now moved to remand the case back to state
court for lack of subject matter jurisdiction.

Defendant has

moved to dismiss the action in its entirety under Fed. R. Civ.
P. 12(b)(6) for failure to state a claim upon which relief can
be granted, again on the grounds that the state law claims are
preempted by federal law.

Because the Court finds that the

claims are not completely preempted by the LMRA, and therefore
there is no federal question creating subject matter
jurisdiction, the Court grants Plaintiff’s motion to remand, ECF
No. 22.

Because the Court has no jurisdiction over this action,

Defendant’s motion to dismiss, ECF No. 5, is denied as moot.
BACKGROUND 1
The Union is a subordinate body of AFL-CIO and the
designated legal representative of all permanent and full-time
employees and permanent part-time employees (“Represented
Employees”) of Defendant HowardCenter in the defined bargaining
unit as certified by the National Labor Relations Board
(“NLRB”).

Defendant HowardCenter is a Vermont nonprofit

1

The following facts are taken from Complaint and the Collective
Bargaining Agreement. The Court may consider the Complaint including
“any statements or documents incorporated into it.” Paulemon v. Tobin,
30 F.3d 307, 308-09 (2d Cir. 1994). Here, the Complaint specifically
references the parties’ CBA. Compl. ¶¶ 8-11. All facts in the
Complaint are assumed to be true for purposes of a Rule 12(b) motion.

2

corporation and health care provider located in Burlington,
Vermont.

HowardCenter contracts with the State of Vermont to

provide Medicaid services and receives State Medicaid funds for
its services as appropriated by the Vermont Legislature.
I. Collective Bargaining Agreement
The Union negotiated a CBA with HowardCenter effective July
1, 2012, through June 30, 2014.

The CBA governs the terms and

conditions of employment for all HowardCenter employees
represented by the Union.

Article V of the CBA establishes the

wages, salaries, and compensation bargained for by the Union and
agreed to by the parties.

Section 501.B of this article

provides:
a. Effective 7/01/2012 the Agency will increase each nonprobationary covered employee’s base in the amount of $.35
per scheduled hour;
b. Effective 7/01/2013, all non-probationary covered staff
will receive a 1.6% increase to base salary.
CBA 16.

Appendix B of the CBA addresses the minimum and maximum

salary levels for employees.

The CBA further provides that it

addresses all subjects of bargaining:
The parties acknowledge that during the negotiations which
resulted in this Agreement, each had unlimited right and
opportunity to make demands and proposals with respect to
all proper subjects of collective bargaining and that all
such proper subjects have been discussed and negotiated
upon and that except as otherwise provided herein, the
Agreement shall not be subject to reopening unless mutually
agreed.

3

Id. at 7.

Article I, Section 106 of the CBA directs that the

“rights and privileges” created by the CBA are enforceable only
pursuant to the terms and conditions established by the
Agreement itself, id., and that all disputes arising over “a
violation, misinterpretation, or misapplication of” its terms
shall be subject to the grievance and arbitration procedures
established by the CBA.
II.

Id. at 29.

Act 50 Appropriations

HowardCenter is reimbursed for its Medicaid services
through the State Medicaid budget.

The State Medicaid budget is

annually appropriated by the Vermont Legislature.
Ann. tit. 33, § 1901a.

Vt. Stat.

In May 2013, the Legislature passed Act

50, the appropriations act for fiscal year 2014.

Section

E.307.2 of Act 50, “Reduction in Medicaid Cost-Shift,” provides
that “[b]eginning on November 1, 2013, the Agency of Human
Services shall increase Medicaid reimbursements to participating
providers for services provided by an amount equal to three
percent of fiscal year 2012 expenditures for those services.”
E.307.2(a).

The Act further provides that “[r]evenue generated

from the Medicaid rate increase in this act shall be used by
designated agencies and specialized service agencies to provide
a commensurate increase in compensation for direct care
workers.”

E.314.5. Act 50 requires that each designated and

4

specialized service agency report to the Agency of Human
Services how it has complied with this provision.

Id. 2

HowardCenter is entitled to and has accepted the additional
three percent in funds appropriated under Act 50.
16.

Compl. ¶¶ 7,

However, according to Plaintiff, it has not provided a

commensurate increase in compensation to its direct care
workers.

A substantial portion of the Union’s Represented

Employees are direct service providers to Medicaid recipients
(“Qualified Represented Employees”).

The crux of the Union’s

Complaint is that HowardCenter is required to use the additional
funds under Act 50 to increase the compensation for the
Qualified Represented Employees, and that it has not met these
requirements despite accepting the increase in reimbursements.
The Union filed an action in the Chittenden Superior Court
on March 7, 2014, bringing claims of unjust enrichment, breach
of trust, and conversion under state law.
39.

Compl. ¶¶ 28-29, 33-

As relief, the Union seeks an accounting of the funds

received as a result of Act 50, declaratory judgment finding
that HowardCenter is required to pay an additional three percent
to direct service providers, and an injunction requiring
HowardCenter to pay the increase in reimbursements directly to

2

In February 2014, the Supplemental Appropriations Act amended
this language to provide that agencies “shall provide an increase in
compensation for direct care workers that is in proportion to the
Medicaid rate increase.” Act No. 95 (2013 Adj. Sess.), § 76.

5

the direct service providers.

Defendant removed the case to

this Court on April 7, 2014, asserting federal jurisdiction
based on § 301 of the LMRA, 29 U.S.C. § 185.
DISCUSSION
There are two motions currently pending before the Court.
Defendant has moved to dismiss the Complaint under Rule 12(b)(6)
for failure to state a claim upon which relief can be granted on
the ground that it is preempted by federal labor law.

Plaintiff

has moved to remand the case to state court for lack of subject
matter jurisdiction.

Because the disposition on the motion to

remand will determine whether this Court has jurisdiction to
decide the motion to dismiss, the Court addresses the motion to
remand first.
I.

Motion to Remand
Defendant removed this case in April 2014, asserting

federal jurisdiction based on complete preemption under § 301 of
the LMRA.

A defendant may remove an action filed in state court

to federal court if the case could have originally been filed in
federal court.

28 U.S.C. § 1441(a).

A case may be filed in

federal court “when a federal question is presented on the face
of the plaintiff’s properly pleaded complaint.”
Inc. v. Williams, 482 U.S. 386, 392 (1987).

Caterpillar,

A federal question

is presented where a civil action arises under federal law.
U.S.C. § 1331 (“The district courts shall have original
6

28

jurisdiction of all civil actions arising under the
Constitution, laws, or treaties of the United States.”).

As the

removing party, Defendant “bears the burden of establishing
jurisdiction.”

Blockbuster, Inc. v. Galeno, 472 F.3d 53, 57 (2d

Cir. 2006).
In this case, there are no federal questions on the face of
the complaint; instead, all of Plaintiff’s claims are grounded
in state law.

Defendant nonetheless maintains that federal

jurisdiction exists because the state law claims are completely
preempted by federal law.

Because preemption is usually a

defense to suit (and therefore necessarily does not appear on
the face of the complaint), a defendant “generally may not
remove an action on the basis of federal preemption.”

Franklin

H. Williams Ins. Trust v. Travelers Ins. Co., 50 F.3d 144, 147
(2d Cir. 1995).

However, the Supreme Court has recognized a

limited exception to this rule in cases of “complete
preemption”—that is, “when Congress has so completely preempted
an area of law that any civil complaint is necessarily federal
in character.”

Domnister v. Exclusive Ambulette, Inc., 607 F.3d

84, 88 (2d Cir. 2010).

Under the complete-preemption doctrine,

“certain federal statutes are construed to have such
‘extraordinary’ preemptive force that state-law claims coming
within the scope of the federal statute are transformed, for
jurisdictional purposes, into federal claims.”
7

Sullivan v. Am.

Airlines, Inc., 424 F.3d 267, 272 (2d Cir. 2005).

In such

cases, a court is “obligated to construe the complaint as
raising a federal claim and therefore ‘arising under’ federal
law.”

Id.

Remand in this case thus turns on whether

Plaintiff’s state law claims are “completely preempted” by
federal law.
A. Section 301 Preemption
The Supreme Court has expressly designated Section 301 as
one of the rare 3 statutes bestowed with the “unusual preemptive
power” that creates federal jurisdiction over state law claims.
Avco Corp. v. Aero Lodge No. 735, 390 U.S. 557, 558–62 (1968).
When § 301 preempts a state law claim, federal jurisdiction may
be established “even when the plaintiff’s complaint makes no
reference to federal law and appears to plead an adequate state
claim.”

Vera v. Saks & Co., 335 F.3d 109, 114 (2d Cir. 2003)

(citing Livadas, 512 U.S. at 122 n.16).

As a result, if the

Court finds Plaintiff’s state law claims are “preempted by
section 301, federal jurisdiction exists and the removal of [the
Union’s] case was proper.”

Hernandez v. Conriv Realty

Assocs., 116 F.3d 35, 38 (2d Cir. 1997).

3

So rare is this circumstance that the United States Supreme
Court has found it only three times: in § 301 of the LMRA; § 502(a) of
the Employee Retirement Income Security Act (“ERISA”); and §§ 85 and
86 of the National Bank Act. Sullivan, 424 F.3d at 272.

8

Section 301 establishes federal jurisdiction over “suits
for violation of contracts between an employer and a labor
organization representing employees in an industry affecting
commerce” without respect to the amount in controversy or
citizenship of the parties.

Id.

While the text of § 301 is

jurisdictional, the Supreme Court has interpreted this provision
as “doing more than confer jurisdiction in the federal courts
over labor organizations . . . [instead,] it expresses a federal
policy that federal courts should enforce [Collective Bargaining
Agreements] on behalf of or against labor organizations.”
Textile Workers Union v. Lincoln Mills of Alabama, 353 U.S. 448,
455 (1957).

The Supreme Court has extended § 301 preemption to

claims where “resolution of a state-law claim is substantially
dependent upon analysis of the terms of an agreement made
between the parties in a labor contract.”

Allis-Chalmers Corp.

v. Lueck, 471 U.S. 202, 220 (1985)).
Although the preemptive scope of section 301 is
significant, the Supreme Court has repeatedly cautioned that
such preemption does not apply every time a CBA is
“tangentially” implicated.

Lingle v. Norge Division of Magic

Chef, 486 U.S. 399, 413 n.12 (1988).

Instead, “if a state

prescribes rules or establishes rights and obligations that are
independent of a labor contract, actions to enforce such
independent rules or rights would not be preempted by section
9

301.”

Vera, 335 F.3d at 115 (citing Allis-Chalmers Corp., 471

U.S. at 212).
To determine whether a claim is preempted, and hence
removable, the Supreme Court has said that “an application of
state law is pre-empted by § 301 . . . if such application
requires the interpretation of a collective-bargaining
agreement.” Lingle, 486 U.S. at 413 (emphasis added). The Lingle
Court specifically cautioned against applying § 301 preemption
too broadly, stating:
A collective-bargaining agreement may, of course,
contain information such as rate of pay and other
economic benefits that might be helpful in determining
the damages to which a worker prevailing in a statelaw suit is entitled. Although federal law would
govern the interpretation of the agreement to
determine the proper damages, the underlying state-law
claim, not otherwise pre-empted, would stand. Thus, as
a general proposition, a state-law claim may depend
for its resolution upon both the interpretation of a
collective bargaining agreement and a separate statelaw analysis that does not turn on the agreement. In
such a case, federal law would govern the
interpretation of the agreement, but the separate
state-law analysis would not be thereby preempted. . .
. [N]ot every dispute . . . tangentially involving a
provision of a collective-bargaining agreement, is
pre-empted by § 301.
Lingle, 486 U.S. at 413 n.12 (quotation and citations omitted).
A state law claim is “independent” of a CBA for § 301 preemption
purposes if “the state-law claim can be resolved without
interpreting the agreement itself.”
F.3d 153, 158 (2d Cir. 2001).

Wynn v. AC Rochester, 273

As a result, a claim that

10

requires mere consultation of a CBA is not necessarily
preempted.

See Livadas, 512 U.S. at 124 (“[W]hen the meaning of

contract terms is not the subject of dispute, the bare fact that
a collective-bargaining agreement will be consulted in the
course of state law litigation plainly does not require the
claim to be extinguished.”).
Here, Defendant argues 4 that the Complaint is completely
preempted by § 301 because the state law claims implicate the
CBA between the parties.

29 U.S.C. § 185.

Thus, the question

to be determined here is whether Plaintiff’s claims under Act 50
are dependent upon an analysis of the CBA between the parties
such that these claims “necessarily arise under” federal law.
i. Plaintiff’s interpretation of Act 50 does not
require an interpretation of the CBA
The Union alleges that Defendant failed to pay the
Qualified Represented Employees money specifically devised to
them by the Vermont Legislature under Act 50.

Thus, on its

face, the Complaint does not assert that Defendant violated the
CBA.

This action does not arise under the CBA nor does it seek

to enforce it.

However, Defendant argues that § 301 still

preempts the Complaint because, in its view, the claims under
Act 50 require “interpretation” of the CBA.
4

Specifically,

Defendant’s preemption arguments under § 301 are primarily
raised in the motion to dismiss. Because this inquiry is identical in
the remand and dismiss contexts, Defendant’s arguments will be
considered in the discussion regarding the motion to remand.

11

Defendant contends that because employee compensation and raises
are addressed in the CBA, and because the CBA stipulates that it
represents the exclusive rights and obligations of the parties
on all of the subjects addressed within the Agreement,
Plaintiff’s claim that the Qualified Represented Employees
should receive additional compensation under Act 50 necessarily
involves the CBA.

Defendant also notes that Plaintiff’s claims

will require reference to the pay rates set out in the CBA, and
that HowardCenter anticipated increased funding from the state
when it negotiated these rates.

In response, Plaintiff

maintains that its claims are independent of the CBA and at most
would require limited reference to the CBA rather than an
“interpretation” such to implicate § 301 preemption.
While the boundary between claims requiring
“interpretation” of a CBA and those requiring mere
“consultation” is “elusive,” Wynn, 273 F.3d at 158, the existing
case law makes clear that mere parallelism between the facts and
issues to be addressed under a state law claim and those to be
addressed under § 301 does not render the state-law analysis
dependent on the collective bargaining agreement.

In Lingle,

the plaintiff was an employee covered by a CBA that provided a
contractual remedy for discharge without just cause.

The

question presented was whether her state law claim for
retaliatory discharge was preempted by § 301, as the CBA in
12

question established a procedure for arbitration of disputes
concerning “the effect, interpretation, application, or claim of
a breach or violation” of the CBA.

486 U.S. at 402.

The

Supreme Court found that the state law retaliatory discharge
claim was not preempted by § 301 because none of the elements of
the state law claim required the court to interpret any terms of
the CBA; thus, the state law claim was “independent” of the CBA.
Id. at 411.
The holding in Lingle contrasts with cases where preemption
was found because the state law claim depended on an
interpretation of the CBA’s terms.

For example, in Anderson v.

Asset Corp., the Second Circuit considered whether § 301
preempted a state law claim for tortious interference where the
alleged interference was with a CBA.
2005).

416 F.3d 170 (2d Cir.

Because the determination of whether the CBA had been

interfered with necessarily required the court to construe the
scope of the CBA itself, the court found that the tortious
interference claim was not independent of the CBA and therefore
preempted by § 301.

Similarly, in Vera, the complaint

challenged the legality of a term in the CBA; thus, the court
found that the claim would require “substantial interpretation”
of the CBA establishing § 301 preemption.

335 F.3d at 115.

Plaintiff’s claims here are based on the requirements set
by the Legislature in passing Act 50.
13

The determinative

question will be whether the act requires HowardCenter to direct
the newly appropriated funds to a certain class of employees.
Defendant makes several arguments that this determination will
necessarily require an interpretation of the CBA’s terms.
However, none of these arguments demonstrate that Plaintiff’s
claims depend upon a construction of the CBA such to implicate
complete preemption under § 301.
First, Defendant asserts that Plaintiff’s claims will
require a court to consult the CBA to determine which employees
fall within the class of direct service providers contemplated
by Act 50, in order to decide which employees qualify for a pay
increase under the statute.

However, this class of employees

will not be determined by reference to the CBA, as it is a
state-designated class of employees, not one determined by the
contract between HowardCenter and the Union.

As counsel for

Plaintiff pointed out at the motions hearing, Act 50’s
requirements are “agnostic” as to whether the recipient of the
reimbursements has a CBA.

While Act 50 and the CBA may both

address classes of employees, this parallelism does not require
interpretation of the CBA, as the Union could make its arguments
under Act 50 regardless of whether the parties operated under a
CBA or not.

Thus, the Union’s claims are not reliant on the

terms of the CBA as in Anderson or Vera, and are instead
“independent” of the CBA as in Lingle.
14

Defendant also argues that Plaintiff’s claims are dependent
on the CBA because the parties already bargained for wages and
raises when it negotiated the CBA.

However, the Second Circuit

has made clear that if a state prescribes rules or regulations
that are independent of a labor contract, actions to enforce
such rules are not preempted by § 301.

Vera, 335 F.3d at 115. A

federal district court in this circuit found that this remains
true even when the regulations address subjects that have been
discussed in an existing CBA.

See Alderman v. 21 Club, Inc.,

733 F. Supp. 2d 461, 467-68 (S.D.N.Y. 2010).
Alderman concerned a New York statute that required a 20%
gratuity for certain service employees.

Before the statute was

passed, the parties operated under a CBA that required only an
18% gratuity.

After the statute was passed, the plaintiffs

brought an action under state law seeking the 2% difference.
The court found that the claim for 20% gratuity did not depend
upon an interpretation of the CBA even though the gratuity rate
had clearly been addressed and bargained for in the preexisting
CBA.

The similarities to the instant case are obvious.

Here,

the parties bargained for wages and raises in promulgating its
CBA.

In passing Act 50, the State added additional obligations

separate from those bargained for under the CBA.

As in

Alderman, the state law claims based on Act 50 are not preempted
because even though the CBA contained provisions regarding
15

wages, the Act 50 requirements are separate from the CBA and do
not depend on construction of its terms.
Defendant also notes that, to adjudicate the claims under
Act 50, a court may have to refer to the CBA in order to
determine the actual amount of wage increase implicated by the
Act.

While certainly possible, the Supreme Court has found that

the “simple need to refer to the bargained-for wage rates” to
determine the appropriate remedy does not amount to an
“interpretation” of the CBA implicating § 301 preemption.
Livadas, 512 U.S. at 125.

Instead, the Court has declined to

find § 301 preemption in cases where the state law claim
requires a referral to the CBA for rate of pay, recognizing that
a CBA may contain information that might be helpful in
determining damages in a state law suit.

See id. at 124 (“not

every dispute . . . tangentially involving a provision of a
collective-bargaining agreement, is pre-empted by § 301”).
Thus, the fact that a court may reference the CBA’s salary rates
to determine the increase required by Act 50 is not sufficient
to warrant § 301 preemption.
Finally, Defendant argues that the Union’s construal of Act
50 preempted because HowardCenter anticipated the increase in
funding from the state when it promulgated the CBA, and that the
required increase was already addressed, in whole or in part,
when the parties reached their bargaining agreement.
16

This

argument does not sustain preemption for two reasons.

First,

Defendant cannot seriously contend that this wage increase was
bargained for or away in the CBA as it is derived from
reimbursements that did not exist at the time the CBA was
enacted.

Second, even if this were the case, this would make

the CBA at most a defense to Plaintiff’s suit.

“Complete

preemption” under § 301 is implicated only when the plaintiff’s
claim is “substantially dependent on analysis of a collectivebargaining agreement.”

Caterpillar, 482 U.S. at 394.

The

federal jurisdiction-creating power of § 301 is not implicated
when “the employer raises only a defense that requires a court
to interpret or apply a collective-bargaining agreement.”

Id.

at 398 (emphasis added) (finding that “the presence of a federal
question, even a § 301 question, in a defensive argument does
not overcome the paramount policies embodied in the well-pleaded
complaint rule”).

Therefore, the Union’s claims under Act 50 do

not rely upon an interpretation of the CBA such to implicate
complete preemption under § 301.
ii. None of Plaintiff’s state law causes of action
require an interpretation of the CBA
Defendant also specifically argues that each of the three
state law causes of action Plaintiff brings—unjust enrichment,
conversion, and breach of trust—require an interpretation of the
CBA such to implicate § 301 preemption.

17

In support, Defendant

cites case law finding § 301 preemption in cases regarding those
types of state law claims.

However, none of these cases support

a finding of complete preemption under § 301.
First, Defendant argues that the unjust enrichment claim
requires interpretation of the CBA.

To prove unjust enrichment

under Vermont law, a plaintiff must establish (1) that a benefit
was conferred on the defendant; (2) the defendant accepted the
benefit; and (3) it is inequitable to allow the defendant to
retain the benefit.

Akerley v. North Country Stone, Inc., 620

F. Supp. 2d 591, 602 (D. Vt. 2009) (citing Johnson v. Harwood,
945 A.2d 875 (Vt. 2008)).

Plaintiff’s unjust enrichment theory

posits that the HowardCenter was unjustly enriched when it
accepted Medicaid funds from the State and did not use them to
increase the compensation of direct service providers as
directed.

Defendant argues that the determination of whether

there was unjust enrichment here requires reference to the CBA,
and that the claim would qualify as a “violation,
misinterpretation, or misapplication” of the terms of the CBA
subject to its arbitration and grievance procedures.

However,

this is plainly not a claim arising under the CBA, and does not
involve a “violation, misinterpretation, or misapplication”
thereof.
Furthermore, while Defendant cites several out-of-circuit
cases where state unjust enrichment claims were found preempted
18

by § 301, they are all inapposite here.

See, e.g., Moon v.

Goodyear Tire & Rubber Co., 519 F. App’x. 620 (11th Cir. 2013);
Cavallaro v. UMass Memorial Healthcare, Inc., 678 F.3d 1 (1st
Cir. 2012).

For example, Moon involves an unjust enrichment

claim grounded in reliance on a buyout provision in a CBA.
Fed. Appx. at 624.

519

Similarly, in Cavallaro, the First Circuit

found § 301 preempted an unjust enrichment action based on the
theory that plaintiffs had not been paid the wages they were
owed pursuant to a CBA.

678 F.3d at 5.

Thus, the state law

claims in Moon and Cavallaro relied on the terms of the CBA in a
way that is not present here. 5

By contrast, Plaintiff’s claim

for unjust enrichment relies on a construal of HowardCenter’s
obligations under Act 50 and does not require an interpretation
of the CBA other than to (possibly) determine the full amount

5

The remaining cases cited by Defendant are similarly
unavailing. See Shearon v. Comfort Tech Mechanical Co., 936 F. Supp.
2d 143, 153-54 (E.D.N.Y. 2013) (finding § 301 preempted unjust
enrichment claim that “hinge[d] on rights created by the CBA” and were
“inextricably intertwined” with its terms); Jones v. C & D
Technologies, Inc., 1:11-CV-01431-JMS, 2012 WL 3756549, *4 (S.D. Ind.
Aug. 28, 2012) (finding preemption where court must consult CBA to
determine “whether employer owed wages in the first instance”); Carter
v. Tyson Foods, Inc., 3:08-CV-209, 2009 WL 4790761, *8 (N.D. Ind. Dec.
3, 2009) (finding preemption where claim would “require a robust and
involved analysis of the CBA”); Goss v. Firestone Polymers, L.L.C.,
CIV.A. 1:04-CV-665, 2005 WL 1004717 (E.D. Tex. Apr. 13, 2005) (finding
preemption over quantum meruit claim where claim was “merely . . . a
rephrased claim for employee benefits” under the CBA); McCarty v.
Reynolds Metals Co., 883 F. Supp. 356, 361 (S.D. Ind. 1995) (finding
unjust enrichment claim preempted where required interpretation and
application of CBA).

19

owed.

Again, the fact that a CBA may be referred to does not

make the claim inextricably linked to the CBA.
Defendant fares no better with regard to Plaintiff’s breach
of trust claim.

Under this claim, Plaintiff argues that the Act

50 funds were held in a constructive trust by HowardCenter for
the direct service providers.

“A court may impose a

constructive trust when “a party obtains some benefit that they
cannot, in good conscience, retain.”
¶ 17, 968 A.2d 310, 315.

Weed v. Weed, 2008 VT 121,

Courts may employ such constructive

trusts to avoid unconscionable results and to prevent unjust
enrichment.

Preston v. Chabot, 412 A.2d 930, 933 (Vt. 1980).

Plaintiff’s constructive trust claim therefore will require a
court to determine whether Act 50 funds rightly belong to the
Qualified Represented Employees.

In making this determination,

the court will have to look to the statutory text; however, it
will not require an interpretation of the terms of the CBA.
Again, while HowardCenter argues that it already anticipated an
increase in Medicaid funding when it negotiated the CBA, this is
a defensive theory and does not preempt Plaintiff’s claims.
As in the unjust enrichment context, the case law Defendant
cites does not support finding preemption over the breach of
trust claim.

Defendant cites a Sixth Circuit case finding

breach of trust claims preempted by § 301.

See Central States

Southeast and Southwest Areas Pension Fund v. Kraftco, Inc., 799
20

F.2d 1098, 1108-09 (6th Cir. 1986).

However, again, the case is

easily distinguishable from the instant one.

In Central States,

the breach of trust claim involved a trust agreement that
incorporated the terms of the CBA, and the claim therefore
depended on an analysis of the CBA such to compel § 301
preemption. 6

By contrast, Plaintiff’s breach of trust claim does

not depend on the relationship between Plaintiff and Defendant,
or on the agreement between them, but only on whether Act 50
requires certain appropriations to be used for a particular
purpose.

This is necessarily the case as Act 50’s requirements

apply to both unionized and non-unionized employees.
Finally, Plaintiff’s conversion claim is also not preempted
by § 301.

On this claim, Plaintiff alleges that HowardCenter

converted money that properly belongs to the Qualified
Represented Employees as required by Act 50.

In order to

establish a claim for conversion under Vermont law, “the owner
of property must show only that another has appropriated the
property to that party’s own use and beneficial enjoyment, has

6

In this section, Defendant also cites several cases where
courts found § 301 preemption with regard to breach of fiduciary duty
claims, on the grounds that reference to the CBA was necessary to
determine whether a duty of care existed and to define the nature and
scope of that duty. Defendant argues that these cases control because
any breach of trust must involve a fiduciary relationship. However,
Defendant cites no support for this position; a fiduciary relationship
is not required for a court to impose a constructive trust. Thus,
these cases should not alter the Court’s conclusion on the breach of
trust claim.

21

exercised dominion over it in exclusion and defiance of the
owner’s right, or has withheld possession from the owner under a
claim of title inconsistent with the owner’s title.”

Montgomery

v. Devoid, 2006 VT 127, ¶ 12, 915 A.2d 270, 275 (internal
quotations omitted).

Defendant argues that § 301 preempts the

conversion claim because it will require an interpretation of
the CBA in order to determine the parties’ rights and
obligations regarding employee compensation.

However, the

conversion claims only require an interpretation of Act 50 to
determine whether the funds in question truly belong to the
Qualified Represented Employees; the CBA is not implicated in
this determination.

Defendant again argues that “whether [the

parties] intended the CBA to account for the Act 50 funds in
question” will require a look at the CBA.

however, the CBA

predates Act 50, and thus there can be no question whether the
CBA accounts for the Act 50 funds, as they did not exist at the
time the CBA was enacted.

Any argument that HowardCenter

already accounted for these funds in the CBA is a defensive
application of the CBA and therefore does not preempt the state
law claims for subject matter jurisdiction purposes.
In support of its position, Defendant cites several cases
finding state law conversion claims preempted by § 301.

See

Williams v. George P. Reinties Co., 361 F.3d 1073, 1074 (8th
Cir. 2004) (Section 301 preempted claim that defendant converted
22

moneys that should have been paid to Union according to terms of
CBA); McCormick v. AT&T Technologies, Inc., 934 F.2d 531, 537
(4th Cir. 1991) (Section 301 preempted conversion claim that
required “recourse to the [CBA]”); Snyder v. Dietz & Watson,
Inc., 837 F. Supp. 2d 428, 444 (D.N.J. 2011) (finding § 301
preemption over conversion claim that turned on interpretation
of CBA).

However, in each of these cases, plaintiffs’

conversion claims were reliant on interpretations of the CBA.
Here, Plaintiff would make the same conversion argument whether
the CBA existed or not.

Thus, this case is distinguishable, and

the conversion claim, which requires at most a limited
consultation of the CBA, is not preempted by § 301.
Because none of Plaintiff’s state law claims, nor its
theory of Act 50, is dependent upon an interpretation of the CBA
between the parties, the Complaint is not completely preempted
by § 301.

Therefore, federal question jurisdiction cannot be

established by § 301 complete preemption.
B. NLRA Preemption
Defendant also argues that Plaintiff’s claims are preempted
by the NLRA. 7

The NLRA arguments are ultimately academic,

7

Although the NLRA contains no express preemption provision, the
Supreme Court has held that “Congress implicitly mandated two types of
preemption as necessary to implement federal labor policy.” Chamber
of Commerce of U.S. v. Brown, 554 U.S. 60, 65 (2008). These types of
preemption are known as Machinists preemption and Garmon preemption.
Machinists preemption forbids the NLRB and the States from regulating
conduct that Congress intended to be left to the free play of economic

23

however, because any finding of NLRA preemption has no impact on
this Court’s subject matter jurisdiction.

NLRA preemption does

not arise to the level of “complete preemption” required for
removal jurisdiction.

See Sullivan, 424 F.3d at 272 (explaining

that “the complete-preemption doctrine must be distinguished
from ordinary preemption, also known as defensive preemption”).
The Supreme Court has made clear that a plaintiff’s suit does
not arise under federal law simply because the defendant may
raise the defense of ordinary preemption.

See Caterpillar, 482

U.S. at 393 (“[I]t is now settled law that a case may not be
removed to federal court on the basis of a federal defense,
including the defense of pre-emption, even if the defense is
anticipated in the plaintiff's complaint, and even if both
parties concede that the federal defense is the only question
truly at issue.”)
Neither the Supreme Court nor the Second Circuit has found
that NLRA preemption constitutes “complete preemption.”
Instead, the Supreme Court has said that “the fact that [a]
defendant might ultimately prove that a plaintiff’s claims are
forces. See Lodge 76 Int’l Ass’n of Machinists & Aerospace Workers v.
Wis. Empl. Rels. Comm’n, et al., 427 U.S. 132, 140 (1976). Garmon
preemption precludes state interference with the NLRB’s interpretation
and enforcement of the NLRA’s regulatory scheme, and thus forbids
State regulation of “activity that the NLRA protects, prohibits, or
arguably protects or prohibits.” Brown, 554 U.S. at 65; San Diego
Building Trades Council v. Garmon, 359 U.S. 236 (1959). As will be
explained below, neither type of NLRA preemption has been found to
constitute “complete preemption” by federal courts in this circuit.

24

pre-empted under the NLRA does not establish that they are
removable to federal court.”

Caterpillar, 482 U.S. at 398

(finding that the employer asserting NLRA preemption may “raise
this question in state court”).

Similarly, while the Second

Circuit has not directly ruled on whether the NLRA is subject to
complete preemption, it has found removal improper based on a
preemption defense under the Railway Labor Act, a “statute
similar to the NLRA in many respects.”

Domnister, 607 F.3d at

91; see also Sullivan, 424 F.3d at 277.
Moreover, every district court in this circuit to assess
the jurisdictional impact of NLRA preemption has declined to
find that NLRA preemption amounts to the “complete preemption”
required for removal.

See, e.g., Alcantara v. Allied

Properties, LLC, 334 F. Supp. 2d 336, 344 (E.D.N.Y. 2004)
(finding that “Machinists preemption does not constitute the
‘extraordinary’ circumstance justifying complete federal
preemption”); TKO Fleet Ents. v. District 15, Int’l Ass’n of
Machinists & Aerospace Workers, 72 F. Supp. 2d 83, 87 (E.D.N.Y.
1999) (collecting cases and finding that the “lower courts have
uniformly held that defendants may not remove state claims to
federal court by alleging Garmon preemption”).

This conclusion

has been echoed by federal courts in other circuits.

See, e.g.,

Hernandez v. Harvard Univ., CIV.A. 12-11978-DPW, 2013 WL 1330842
(D. Mass. Mar. 28, 2013) (“Defensive preemption under the NLRA,
25

unlike ‘complete preemption’ under the LMRA, does not provide a
basis for federal jurisdiction.”); Hahn v. Rauch, 602 F. Supp.
2d 895, 909-10 (N.D. Ohio 2008) (finding that removal of state
law claims cannot be sustained on the basis of NLRA preemption);
Baldwin v. Pirelli Armstrong Tire Corp., 927 F. Supp. 1046, 1052
(M.D. Tenn. 1996) (finding that NLRA preemption is not enough to
remove state claims to federal court under the complete
preemption doctrine).
Given that the Supreme Court has cautioned that “the
prudent course for a federal court that does not find a clear
congressional intent to create removal jurisdiction will be to
remand the case to state court,” Marcus v. AT&T Corp., 138 F.3d
46, 54 (2d Cir. 1998) (quoting Metropolitan Life, 481 U.S. 58,
68 (1987)(Brennan J., concurring)), this Court finds that NLRA
preemption does not provide a basis for removal jurisdiction.
Defendant’s arguments regarding NLRA preemption are therefore
irrelevant to the Court’s subject matter jurisdiction inquiry.
Because Plaintiff’s claims are not completely preempted by
§ 301 and no federal questions arise on the face of the
Complaint, this Court does not have removal jurisdiction and the
case must be remanded to state court for further proceedings.
As the Court does not have jurisdiction, it will not address the
merits of Defendant’s NLRA preemption arguments.

These

arguments are properly raised before a judge in state court.
26

II.

Motion to Dismiss
Defendant has filed a motion to dismiss under Rule

12(b)(6).

Because the Court grants Plaintiff’s motion to

remand, the motion to dismiss is denied as moot.
CONCLUSION
For the reasons stated above, the Court finds that the
Complaint is not preempted by § 301 and thus there is no basis
for removal jurisdiction.

Plaintiff’s motion to remand for lack

of subject matter jurisdiction is therefore granted.

This

action is remanded to state court and the pending motion to
dismiss is denied as moot.
Dated at Burlington, in the District of Vermont, this 27th
day of August, 2014.
/s/ William K. Sessions III
William K. Sessions III
District Court Judge

27