Finkel v. Structure Tone, LLC

Background

Dr. Gerald R. Finkel, as chairman of the Joint Industry Board of the Electrical Industry, sued on behalf of several multiemployer benefit plans. The plans were established under a collective bargaining agreement between a union and certain employers or employer organizations. Structure Tone, LLC was the general contractor on three construction projects and hired O.H.&M. Electrical Corp. (OHM) as a subcontractor. OHM was covered by the collective bargaining agreement, which required it to make hourly contributions to the plans.

Finkel alleged that OHM failed to pay $1,413,208 in contributions between June 15 and December 7, 2022. He sued Structure Tone in New York state court under Section 198-e of the New York Labor Law, which can impose liability on a contractor for certain debts incurred by a subcontractor. Structure Tone removed the case to federal court, arguing that the Employee Retirement Income Security Act (ERISA) and Section 301 of the Labor Management Relations Act (LMRA) completely preempted the state-law claim.

The court considered three matters: Finkel’s motion to remand the case to state court, Structure Tone’s motion for judgment on the pleadings, and Finkel’s conditional motion to amend the complaint if the original claim was preempted.

ERISA preemption

The court held, as a matter of first impression, that ERISA preempts a Section 198-e claim seeking contributions from a general contractor for a subcontractor’s delinquent benefit-plan contributions when a collective bargaining agreement establishes the contribution obligation.

ERISA Section 502 allows a plan fiduciary to sue to enforce contribution requirements, and Finkel conceded that he was a fiduciary of the plans. The court determined that Finkel’s claim was sufficiently related to an ERISA claim even though ERISA did not expressly authorize a fiduciary to recover the subcontractor’s contributions from a general contractor that was not a party to the collective bargaining agreement. The court reasoned that ERISA’s enforcement remedies were intended to be exclusive, so the absence of a remedy against this particular type of defendant supported preemption rather than defeating it.

The court also rejected Finkel’s argument that Section 198-e supplied an independent state-law duty. It concluded that the alleged debt depended on OHM’s obligation to make contributions under ERISA and the collective bargaining agreement. Without that federal-law-based contribution obligation, the court said, there would be no debt for Section 198-e to impose on Structure Tone.

LMRA preemption

The court separately held that the LMRA preempted the state-law claim. Determining whether OHM owed the funds contributions required examining the collective bargaining agreement, including its contribution requirements and hourly rates. The court explained that LMRA preemption depends on whether resolving the claim requires interpreting the agreement, not on whether the defendant is itself a party to that agreement. Structure Tone’s status as a nonparty therefore did not prevent preemption.

Amended complaint

Finkel proposed adding claims against OHM for delinquent contributions under ERISA and for violating the collective bargaining agreement under the LMRA. Structure Tone did not oppose adding those claims. The court therefore granted in part Finkel’s motion for leave to amend, limited to the proposed ERISA and LMRA claims against OHM and without prejudice to any defense OHM might assert.

The court denied in part leave to add or reassert a Section 198-e claim against Structure Tone. It found that claim futile because ERISA and the LMRA preempted state-law methods of enforcing the contribution obligation. The proposed amended complaint described the Section 198-e claim as one seeking unpaid benefit contributions directly from Structure Tone, which the court held was preempted.

Disposition

The court denied Finkel’s motion to remand. It granted in part and denied in part Finkel’s motion for leave to file an amended complaint. It denied Structure Tone’s motion for judgment on the pleadings as moot because the proposed amended complaint did not assert an ERISA claim against Structure Tone.

The court ordered that Structure Tone be dismissed from the action and directed Finkel to file the amended complaint by May 13, 2025. The amended complaint could not assert a claim under Section 198-e. Judge Vernon S. Broderick signed the opinion and order.