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Swift Electrical Supply Company, Inc. v. The Township of Lakewood

168 F. Supp.2d 298 (D. N.J. 2001)

CONSTRUCTION LIENS; ERISA; LMRA—ERISA does not preempt the Construction Lien Act and if no collective bargaining agreement is involved or requires interpretation, the Labor Management Relations Act also does not.

In connection with the construction of a public baseball stadium, a vendor of electrical supplies and materials claimed that the electrical subcontractor to whom it delivered materials never paid for those materials. The supplier asserted claims for payment of monies due and owing to the subcontractor from the property owner, the general contractor, and others pursuant to the New Jersey Municipal Mechanics Lien Law (NJMMLL) and the New Jersey Trust Fund Act. It also argued breach of a Joint Party Check Agreement which allegedly called for issuance of joint checks to itself and the subcontractor. In the course of the action, various parties alleged to owe money to the subcontractor filed a third party complaint naming a union benefit fund, a union, and some other suppliers. Their theory was that it was necessary to name these other parties, including the union benefit fund, because under the NJMMLL, “a party bringing an action to enforce a municipal mechanics’ lien claim ‘shall make parties to the action all who have filed claims, the contractor, the subcontractor referred to in the claims, and the public agency with whom the contract was made.’” The parties named in the original suit by the supplier alleged that the union benefit fund had asserted a claim to enforce a municipal mechanics’ lien on the project, making that fund a necessary part of the action. Based upon that assertion, it was argued that a federal court had the original jurisdiction over the action because the involvement of an employee benefit fund invokes provisions of the federal Employee Retirement Income Security Act (ERISA). Further, those parties argued that the provisions of ERISA and the LMRA preempted the NJMMLL. The subcontractor argued that the benefit funds were not necessarily parties to the action because they lacked standing as claimants on the basis that were not entitled to payment within the meanings of the NJMMLL and the New Jersey Trust Fund Act. The union and the employee benefit fund also argued that the cause of action in the law suit did not arise under federal law and “that the doctrine of complete preemption does not apply to an action in which a labor organization or employee benefit fund seeks to enforce claims under the NJMMLL.” At the same time, they disputed the electrical material supplier’s contention that they were not lien claimants within the meaning of the NJMMLL. Under the “well-pleaded complaint rule,” a cause of action “arises under federal law only if a federal question is presented on the face of the plaintiff’s properly pleaded complaint. ... A federal defense to a state law cause of action is not sufficient justification for removal to federal court.” On the other hand, a plaintiff may “cannot avoid federal jurisdiction by omitting necessary federal claims from the complaint.” The Court agreed that all parties asserting a mechanics’ lien claims should have been named as parties to the suit. The defendants also argued that because the liens asserted by the benefit fund and the union were based on the subcontractor’s alleged failure to make contributions to an ERISA plan, they were necessary federal claims that should have appeared on the face of the complaint. The Court disagreed, suggesting that neither the benefit fund nor the union, nor any other parties that had asserted liens, had asserted direct claims for failure to contribute to benefit plans pursuant to the relevant collective bargaining agreement. It pointed out that the defendants to the action were not even parties to the collective bargaining agreement. Consequently, their causes of action were merely to enforce a mechanics’ lien under state law and were not direct action for rights pursuant to the collective bargaining agreement. Because no party was asserting federal claims, no federal claims were required to appear in the complaint, and because there were no necessary federal claims, the matter was not subject to removal to a federal court.

The Court continued with an analysis as to whether ERISA preempted the NJMMLL. It recognized that “Congress may so completely pre-empt a particular area that any civil complaint raising [certain] claims is necessarily federal in character.” With respect to ERISA, preemption affects “any and all state laws insofar as they now or hereinafter relate to any employee benefit plan.” This means that preemption applies when a state law “refers to” ERISA plans in that the state law “acts immediately and exclusively upon ERISA plans” or when “the existence of ERISA plans is essential to the [state] laws’ operation. ... Also, a state law is preempted if it has a ‘connection with’ an employee plan in the sense that it ‘mandate[s] employee benefit structures or their administration’ or ‘provid[es] alternative enforcement mechanisms.’” Otherwise, there is a strong presumption against preemption. Under Court’s analysis, the NJMMLL is a neutral, generic statute with no reference to ERISA or to employee benefit plans. It is “not specifically designed to affect ERISA plans, nor does it single out ERISA plans for special treatment or otherwise attempt to create rights or duties specific to ERISA plans.” Further, the NJMMLL does not have any “connection with” or “conflict with” an ERISA employee plan in that it does not mandate employee benefit structures or their administration or provide alternate enforcement mechanisms. In this particular case, none of the defendants were signatories to the agreements between the subcontractor or the union benefit plan. The general contractors and owners of the project did not act directly as the employer, or indirectly in the interest of the employer, in relation to the employee benefit plan. Consequently, the Court concluded that the NJMMLL is not completely preempted by ERISA. With respect to the argument that the LMRA preempted the NJMMLL claims, “as they constituted a suit for collection of fringe benefit contributions,” the Court concluded that for preemption to exist, “resolution of a state law claim must require interpretation of a” collective bargaining agreement. Here, there was no claim based directly on the collective bargaining agreement, and nothing suggested that the agreement between the subcontractor and the union and benefit fund needed to be interpreted in order to resolve any state law claim. Nothing suggested that there was any conflict between the parties concerning the monies owed other than the fact that they had not been paid. In conclusion, “[a]lthough the [collective bargaining agreement was] tangentially involved, the court dispute before [the Court was] a separate state claim to enforce the lien under the NJMMLL. The defendants to the actions were not a party to the [collective bargaining agreement], and the claim to enforce the lien did not rely upon the [collective bargaining agreement] for its existence.”

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