Opinion
23 Civ. 9254 (LGS)
07-25-2024
WALDEMAR RAKOWICZ, et al., Plaintiffs, v. ABM INDUSTRY GROUPS, LLC, et al., Defendants.
ORDER AND OPINION
LORNA G. SCHOFIELD, DISTRICT JUDGE:
Plaintiffs Waldemar Rakowicz, Roman Karwan, Adam Koniarz, Miguel Dalmasi and Michael Blue filed this action in New York state court alleging that Defendants ABM Industry Groups, LLC (“ABM”) and UG2, LLC (“UG2”) breached their contracts with a non-party, the Fashion Institute of Technology (“FIT”), by failing to pay Plaintiffs the wages and benefits required by the contracts. On October 20, 2023, Defendants removed the action to federal court pursuant to 28 U.S.C. §§ 1331, 1441, 1446 and 1447. On January 23, 2024, Plaintiffs moved to remand for lack of subject matter jurisdiction. On July 18, 2024, Plaintiffs voluntarily dismissed Defendant ABM from the action. The dismissal was so ordered by the Court on July 22, 2024. For the reasons below, Plaintiffs' motion to remand is granted regarding the remaining Defendant, UG2.
I. BACKGROUND
The following facts come from the Complaint and the parties' submissions on this motion. See Broidy Cap. Mgmt. LLC v. Benomar, 944 F.3d 436, 441 (2d Cir. 2019).
ABM and UG2 are both facilities services companies. Prior to 2015, ABM or its predecessor entered into one or more contracts with FIT to provide facilities and maintenance services on the FIT campus through a date in 2019. Beginning in or around 2019, UG2 entered into one or more contracts with FIT to provide facilities and maintenance services on the FIT campus. The Complaint alleges “[u]pon information and belief” that Defendants' contracts with FIT “contained a provision that requires the contractor to pay each of its employees the hourly rate of prevailing wages and benefits set by the Comptroller of the City of New York applicable to the employee's classification.”
Pursuant to the contracts with FIT, Defendants employed Plaintiffs to provide facilities and maintenance services on the FIT campus and entered into collective bargaining agreements (“CBAs”) with the labor union for employees at FIT, of which Plaintiffs are members.
On July 14, 2023, Plaintiffs filed this action in the Supreme Court of the State of New York for New York County alleging that Defendants failed to provide Plaintiffs the wages and benefits owed to employees under Defendants' contracts with FIT. Plaintiffs argue they can enforce the requirements of the FIT contracts as third-party beneficiaries. The Complaint does not refer to any CBA with Defendants.
On October 20, 2023, UG2 removed this action to federal court, “collectively with the assent” of ABM, and ABM filed a supplemental notice of removal. The removal notices assert subject matter jurisdiction on the basis that Plaintiffs' breach of contract claims are completely preempted by Section 301 of the Labor Management Relations Act (“LMRA”), 29 U.S.C. § 185.Plaintiffs filed a motion to remand. ABM sought leave to file an amended notice of removal, and Plaintiffs' motion to remand was denied as moot. ABM filed an amended notice of removal, and Plaintiffs now renew their motion to remand. At the invitation of the Court, Plaintiffs and UG2 filed additional briefing regarding whether supplemental jurisdiction exists over claims against UG2 if federal question jurisdiction is found to exist over claims against ABM only. On May 15, 2024, Plaintiffs and ABM filed a notice of settlement of Plaintiffs' claims against ABM. On July 18, 2024, Plaintiffs voluntarily dismissed their claim against ABM. UG2 is the only remaining Defendant in this action.
UG2's notice of removal asserts that removal also is proper pursuant to the National Labor Relations Act, 29 U.S.C. § 151, et seq. (“NLRA”). UG2 does not address the NLRA in any subsequent briefing or filings. The NLRA is not a complete preemption statute and therefore cannot provide subject matter jurisdiction here. See Solomon v. St. Joseph Hosp., 62 F.4th 54, 60 n.2 (2d Cir. 2023) (not listing NLRA as one of the three complete preemption statutes).
II. LEGAL STANDARD
A. Subject Matter Jurisdiction
Federal courts are “courts of limited jurisdiction.” Behrens v. JPMorgan Chase Bank, N.A., No. 21-2603-CV, 2024 WL 1080026, at *3 (2d Cir. Mar. 13, 2024). If a federal court lacks jurisdiction, it has no adjudicative power to hear the parties' dispute, and any relief it grants “would be void.” Da Silva v. Kinsho Int'l Corp., 229 F.3d 358, 361 (2d Cir. 2000); accord Behrens, 2024 WL 1080026, at *3. For this reason, a party can challenge a federal court's subject matter jurisdiction at any time. See 28 U.S.C. § 1447(c). The party invoking federal jurisdiction bears the burden of showing that jurisdiction exists. See Collins v. United States, 996 F.3d 102, 108 (2d Cir. 2021). Removal statutes are strictly construed, and all doubts should be resolved in favor of remand. See Purdue Pharma L.P. v. Kentucky, 704 F.3d 208, 213 (2d Cir. 2013); accord N.Y. Marine & Gen. Ins. Co. v. Ohio Sec. Ins. Co., No. 21 Civ. 1078, 2021 WL 2291063, at *1 (S.D.N.Y. May 7, 2021).
Under 28 U.S.C. § 1441, a defendant may remove a civil action in state court to federal court if the federal court has original jurisdiction. Under 28 U.S.C. § 1331, federal courts have original jurisdiction over “all civil actions arising under the Constitution, laws or treaties of the United States.” Typically, “[t]he presence or absence of federal-question jurisdiction [under § 1331] is governed by the well-pleaded complaint rule, which provides that federal jurisdiction exists only when a federal question is presented on the face of the plaintiff's properly pleaded complaint.” Solomon v. St. Joseph Hosp., 62 F.4th 54, 60 (2d Cir. 2023). However, “[t]he complete preemption doctrine is an exception to the well-pleaded complaint rule.” Id.
Unless otherwise indicated, in quoting cases, all internal quotation marks, footnotes and citations are omitted, and all alterations are adopted.
“Complete preemption occurs when a federal statute preempts and replaces all state-law causes of action so a claim which comes within the scope of that federal cause of action, even if pleaded in terms of state law, is in reality based on federal law. In those cases, the pre-emptive force of a statute is so extraordinary that it converts an ordinary state common law complaint into one stating a federal claim for purposes of the well-pleaded complaint rule.” Id. Accordingly, a court is obligated to construe the complaint as raising a federal claim and therefore arising under federal law. Id.
B. Labor Management Relations Act
The LMRA is a complete preemption statute. See Solomon, 62 F.4th at 60 n.2. Section 301 of the LMRA states:
Suits for violation of contracts between an employer and a labor organization representing employees in an industry affecting commerce . . ., or between any such labor organizations, may be brought in any district court of the United States having jurisdiction of the parties, without respect to the amount in controversy or without regard to the citizenship of the parties.29 U.S.C. § 185(a). “Section 301 governs claims founded directly on rights created by collective-bargaining agreements, and also claims substantially dependent on analysis of a collective-bargaining agreement. Thus, when resolution of a state law claim is substantially dependent upon or inextricably intertwined with analysis of the terms of a CBA, the state law claim must either be treated as a § 301 claim, or dismissed as pre-empted by federal labor-contract law.” Whitehurst v. 1199SEIU United Healthcare Workers E., 928 F.3d 201, 206-07 (2d Cir. 2019). In contrast, when “a plaintiff covered by a CBA asserts legal rights independent of that agreement, preemption does not occur. A state-law claim is independent when resolving it does not require construing the collective-bargaining agreement.” Id. at 207. Section 301 should not be “read broadly to pre-empt nonnegotiable rights conferred on individual employees as a matter of state law.” Id. “That a court may need to consult the CBA in resolving the state law claim . . . does not subject that claim to preemption by § 301.” Id.
III. DISCUSSION
A. Preemption
Plaintiffs' claim against UG2 is not preempted by the LMRA because the claim asserts legal rights independent of the CBA and is not substantially dependent on an analysis of the CBA. The Complaint alleges that UG2 violated its contract with FIT. That claim turns on the interpretation of the FIT contract, not of the CBA. No party has provided the relevant contract terms, but the Complaint alleges that “[u]pon information and belief” the contract contains provisions creating a right to wages and benefits prescribed by New York Labor Law. UG2 argues that the contract does not contain such a right. The parties dispute the contract's interpretation, a matter for the state court applying principles of contract law. See Beal Sav. Bank v. Sommer, 865 N.E.2d 1210, 1213-14 (N.Y. 2007) (meaning of contract requires looking to contract's text, applying principles of state contract law). The question of Plaintiffs' ability to enforce the contract as third parties also is a question of contract law. See Mendel v. Henry Phipps Plaza W., Inc., 844 N.E.2d 748, 751 (N.Y. 2006) (setting out third-party beneficiary test).
UG2 argues that Plaintiffs' claim is preempted because the CBA governs the terms and conditions of Plaintiffs' employment, including Plaintiffs' wage rates and benefits. This argument is unavailing.
“For purposes of § 301, the existence of a potential CBA-based remedy does not deprive an employee of independent remedies available under state law.... [E]ven if dispute resolution pursuant to a [CBA], on the one hand, and state law, on the other, would require addressing precisely the same set of facts, as long as the state-law claim can be resolved without interpreting the agreement itself, the claim is ‘independent' of the agreement for § 301 pre-emption purposes.” Foy v. Pratt & Whitney Grp., 127 F.3d 229, 236 (2d Cir. 1997). “[I]t is the legal character of a claim, as independent of rights under the [CBA], (and not whether a grievance arising from precisely the same set of facts could be pursued,) that decides whether a state cause of action may go forward.” Livadas v. Bradshaw, 512 U.S. 107, 123-24 (1994) (emphasis added). The existence of the CBA, and Plaintiffs' ability to assert rights pursuant to it, does not result in preemption where Plaintiffs assert rights created by a different contract.
In Caterpillar Inc. v. Williams, 482 U.S. 386 (1987), the Supreme Court concluded that § 301 does not preempt employees' state law claims for breach of their individual contracts because “Section 301 says nothing about the content or validity of individual employment contracts.” Id. at 394. The Supreme Court stated that, even though “respondents, bargaining unit members at the time of the plant closing, possessed substantial rights under the collective agreement, and could have brought suit under § 301,” “[a]s masters of the complaint, . . . they chose not to do so.” Id. at 395. As in Caterpillar, Plaintiffs here have chosen to pursue their claim under state contract law regarding a contract that is not the CBA. UG2 is unpersuasive in trying to distinguish Caterpillar on the basis that the claim there was based on individual employment contracts while Plaintiffs here are not parties to the FIT contract; if a court determines that Plaintiffs are third-party beneficiaries, Plaintiffs properly can assert rights created by the FIT contract, just as the Caterpillar plaintiffs asserted rights created by their individual contracts.
Finally, adjudication of Plaintiffs' claim against UG2 does not require interpretation of the grievance and arbitration provisions in UG2's CBA. The Supreme Court has interpreted § 301 “in large part to assure that agreements to arbitrate grievances would be enforced, regardless of the vagaries of state law and lingering hostility toward extrajudicial dispute resolution.” Livadas, 512 U.S. at 122. Preemption is appropriate if a “court cannot adjudicate [the] claim . . ., as alleged, without first determining whether [the plaintiff] had a right to avail herself of the grievance process” because that determination “requires an interpretation of the CBA.” Whitehurst, 928 F.3d at 207. If “the relief sought by plaintiffs may be provided, or precluded, by the [grievance and arbitration provisions of the CBA],” allowing the action to proceed in state court would “impermissibly circumvent the arbitration procedures” of the CBA. See Dougherty v. Am. Tel. & Tel. Co., 902 F.2d 201, 202-04 (2d Cir. 1990).
Article 25 of UG2's CBA, titled “Grievance/ Arbitration,” states: “All disputes involving the interpretation or application of this agreement that arise between the Employer and the Union shall be resolved as provided in this Article, except where otherwise provided in this Agreement.” (emphasis added). UG2 also provided a supplement to the CBA, which renews the CBA and adds certain provisions. The supplement states, “Any dispute regarding the interpretation or application of this paragraph 6 and the trial period items below shall be pursued via the Grievance and Arbitration provisions of the [CBA].” (emphasis added). As discussed above, Plaintiffs' dispute involves the interpretation or application of UG2's contract with FIT, not the CBA (or its supplement). No interpretation of the CBA is necessary to resolve Plaintiffs' claims. Because the grievance and arbitration provisions plainly do not apply to Plaintiffs' claims, an inquiry into the meaning of the provisions is unnecessary.
B. Supplemental Jurisdiction
Because the claim against ABM has been dismissed, this Opinion does not address whether subject matter jurisdiction existed over that claim. However, even if federal question jurisdiction did exist over the claim against ABM, supplemental jurisdiction does not exist over UG2's claim. Supplemental jurisdiction exists where a claim is “so related to claims in the action within [the court's] original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution.” 28 U.S.C. § 1367(a). “For purposes of section 1367(a), claims form part of the same case or controversy if they derive from a common nucleus of operative fact.” Shahriar v. Smith & Wollensky Rest. Grp., Inc., 659 F.3d 234, 245 (2d Cir. 2011). “In determining whether two disputes arise from a common nucleus of operative fact, [courts] have traditionally asked whether the facts underlying the federal and state claims substantially overlapped or the federal claim necessarily brought the facts underlying the state claim before the court.” Achtman v. Kirby, McInerney & Squire, LLP, 464 F.3d 328, 335 (2d Cir. 2006); McGrier v. City of New York, No. 16 Civ. 5667, 2019 WL 1115053, at *12 (S.D.N.Y. Mar. 11, 2019), aff'd, 849 Fed.Appx. 268 (2d Cir. 2021).
Plaintiffs' claim against UG2 does not derive from a “common nucleus of operative fact” as the claim against ABM because the UG2 claim involves a different FIT contract, a different CBA, a different time period and a different employer. See, e.g., City of Mount Vernon v. Davis, No. 18 Civ. 3007, 2019 WL 1367685, at *7 (S.D.N.Y. Mar. 26, 2019) (no supplemental jurisdiction because the federal and state law claims occurred at different times and involved different rights, interests and underlying facts). Despite UG2's argument to the contrary, the fact that the Complaint asserts one count of breach of contract against both Defendants together does not merge underlying facts relevant to each Defendant to create supplemental jurisdiction over the claim against UG2.
To the extent the Court has supplemental jurisdiction over the claim against UG2, the Court declines to exercise that jurisdiction. “[A] district court[ ] may decline to exercise supplemental jurisdiction over a claim . . . if . . . the district court has dismissed all claims over which it has original jurisdiction[.]” 28 U.S.C. § 1367(c). “[I]n the usual case in which all federal-law claims are eliminated before trial, the balance of factors to be considered . . . -judicial economy, convenience, fairness, and comity -- will point toward declining to exercise jurisdiction over the remaining state-law claims.” Valencia ex rel. Franco v. Lee, 316 F.3d 299, 305 (2d Cir. 2003); accord Lee v. Yang, No. 21 Civ. 7934, 2023 WL 419193, at *5 (S.D.N.Y. Jan. 26, 2023). This case is in relatively early stages and allowing state courts to hear state law claims promotes comity between the federal and state courts. See Cohen v. Postal Holdings, LLC, 873 F.3d 394, 404-05 (2d Cir. 2017) (Calabresi, J., concurring) (“[T]he default rule is that federal courts should not decide related state-law claims unless there is good reason for doing so . . . . [O]ur circuit takes a very strong position that state issues should be decided by state courts.”).
IV. CONCLUSION
Plaintiffs' motion to remand is GRANTED regarding the remaining claim against Defendant UG2. The Clerk of Court is respectfully directed to close the motion at Dkt. No. 30 and to mail a certified copy of this Order to the Supreme Court of the State of New York, New York County pursuant to 28 U.S.C. § 1447(c).