Wong v. BEI Hotel

Background

Sixteen individual employees sued BEI Hotel and Davidson Hospitality Group, which the opinion identifies as the entity managing the hotel. The employees alleged that a collective-bargaining agreement required the defendants to contribute $426.39 each month for each employee who worked at least 160 hours that month to the Western Conference of Teamsters Pension Trust Fund. The employees alleged that the fund was an employee-benefit plan governed by the Employee Retirement Income Security Act (ERISA).

According to the first amended complaint, after Davidson Hospitality Group acquired the hotel in 2018, the defendants stopped directing contributions into the employees’ individual pension accounts. The employees alleged that the defendants continued receiving the benefit of payments from the pension fund without transferring those payments to the employees’ accounts. They asserted nine state-law claims, including embezzlement, negligence, negligent misrepresentation, intentional misrepresentation, breach of fiduciary duty, violations of California Labor Code sections 227 and 227.5, violation of California Business and Professions Code section 17200, conversion, and constructive trust.

Legal standard

The defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal when a complaint does not state a legally sufficient claim. The court considered whether the allegations plausibly showed that the employees were entitled to relief and whether ERISA preempted the state-law claims.

ERISA preemption means that federal law displaces certain state-law claims involving employee-benefit plans. The court described two types: express preemption, when a state law relates to an ERISA plan, and conflict preemption, when a state-law claim conflicts with ERISA’s exclusive remedies. The court’s ruling rested on express preemption.

Court’s analysis

The court held that all nine state-law claims related directly to the ERISA pension plan because they were based on the alleged failure to contribute funds to the plan and the alleged failure to distribute benefits to the employees. The existence of the pension plan was essential to the claims; without that plan, the court concluded, there would be no causes of action as pleaded. The court noted that plaintiffs’ counsel acknowledged during the hearing that the first amended complaint was completely preempted by ERISA’s express-preemption provision.

At the hearing, plaintiffs’ counsel offered a different version of the alleged wrongdoing: that the multi-employer pension fund transferred contributions to the employer rather than directly to the employees and that the employer then refused to distribute the money. The court stated that these allegations differed substantially from the allegations in the first amended complaint, which focused primarily on the defendants’ alleged failure to contribute to the pension fund. The court did not rule on claims that had not been pleaded.

The court also stated that even an amended complaint avoiding express preemption could face conflict-preemption issues if the employees could bring the claims under ERISA and no independent legal duty applied. The court further noted a possible issue under section 301 of the Labor Management Relations Act, which can preempt state-law claims requiring interpretation of a collective-bargaining agreement.

Disposition

The court granted the defendants’ motion to dismiss the first amended complaint. It deferred ruling on the employees’ request for leave to amend until after the parties completed mediation. The order did not state whether the dismissal was with or without prejudice. The order disposed of Docket No. 32.