Natale v. Allied Aviation Services, Inc

Background

Health Fund 917 is an employee welfare benefit plan. The Fund and its trustees sued Allied New York, Inc., Allied Aviation Services, Inc., and three employees of those companies under Section 515 of the Employee Retirement Income Security Act (ERISA). They sought to enforce a 2017 Memorandum of Agreement (MOA) that amended and extended a collective bargaining agreement through 2022.

The MOA changed the medical coverage available to full-time employees from the Allied Aviation Medical Plan to the Health Fund 917 Medical Plan. It required Allied New York to make monthly contributions for union employees participating in Health Fund 917. The Fund alleged that Allied New York underpaid employer contributions from July 1, 2017, through December 31, 2019. Its initial audit calculated $182,392.20 in unpaid contributions and $64,909.05 in interest, although the Fund later reduced its demand to $97,563 in unpaid contributions and $33,716.69 in interest.

The Fund filed the action on August 16, 2023. After the Fund amended its complaint to add Allied New York, Allied New York and Allied Aviation Services moved to dismiss under Rule 12(b)(6), which tests whether a complaint states a legally sufficient claim.

The alleged contribution obligation

The companies argued that they were not required to contribute for employees who did not affirmatively enroll in Health Fund 917 or authorize payroll deductions. The Fund argued that the MOA required coverage and contributions for all full-time employees unless they properly opted out, including by providing proof of alternative coverage as required by the earlier collective bargaining agreement.

The court held that the relevant MOA language was ambiguous. One provision stated that “[a]ll full-time employees” would be covered by the Health Fund 917 Medical Plan, while another required contributions for employees “participating” in the plan. The court identified reasonable interpretations supporting both sides and concluded that the issue could not be resolved on a motion to dismiss. The court also found an additional ambiguity concerning how an employee’s participation was to be determined.

Statute of limitations

The companies argued that the ERISA contribution claim was untimely because the Fund knew of the alleged breach in June 2017 or, at the latest, July 12, 2017, but did not sue until August 16, 2023. The parties agreed that the ordinarily applicable period was New York’s six-year period for breach-of-contract claims.

The Fund argued that New York executive orders issued during 2020 added 228 days to the limitations period. The court agreed. It concluded that the executive orders tolled, rather than merely suspended, the limitations period for this ERISA Section 515 claim. Because the action was filed within six years and 228 days of the latest possible accrual date identified by the companies, the court held that the claim was not time-barred and did not reach the Fund’s other timeliness arguments.

Allied Aviation Services’ liability

The companies argued that Allied Aviation Services could not be liable because the collective bargaining agreement and MOA identified Allied New York, not Allied Aviation Services, as the employer party. The Fund argued that the two companies could be treated as a single employer or that Allied Aviation Services was Allied New York’s alter ego.

The court explained that a collective bargaining agreement may be enforced against a nonsigning employer when the companies operate as a single employer or when one is the other’s alter ego. These are generally factual questions not suited to resolution on a motion to dismiss. The Fund alleged that the companies shared a president, treasurer, and human-resources, payroll, and benefits director; that Allied Aviation Services was the JFK office of Allied New York; and that Allied Aviation Services participated in interpreting and operating the disputed MOA. Accepting those allegations as true at this stage, the court held that the Fund plausibly alleged that the companies operated as a single employer.

Disposition

Judge Oetken denied the Allied Defendants’ motion to dismiss the First Amended Complaint. The defendants were directed to file an answer within 14 days after the opinion and order. The order did not finally decide whether the companies owed the claimed contributions or the amount owed.