In Trustees of the New York City District Council of Carpenters Pension Fund v. Francis A. Lee, 15-cv-8081 (S.D.N.Y.), one of the few cases directly examining the effects of Peacock v. Thomas on alter ego claims in the context of the Employee Income Retirement Security Act of 1974 (“ERISA”), Judge Forrest recently held that such alter ego claims alone can serve as the basis for federal subject matter jurisdiction. Judge Forrest’s decision represents a significant victory for all benefit funds in their ongoing efforts to collect delinquent contributions from non-signatory alter ego employers.
In Peacock, Jack Thomas (“Thomas”) obtained a judgment against Tru-Tech, Inc. (“Tru-Tech”), his former employer, for mismanagement of retirement plan assets pursuant to ERISA. After efforts to collect the judgment failed, Thomas commenced a separate action against Grant Peacock (“Peacock”), the owner of Tru-Tech, to hold Peacock liable for the judgment under an ERISA veil-piercing theory. Peacock argued that the veil-piercing claim did not confer federal subject matter jurisdiction and sought to dismiss the action. Peacock’s argument was rejected by both the district court and the United States Court of Appeals. Ultimately, the United States Supreme Court reversed, holding that subject matter jurisdiction did not exist because the veil-piercing theory was not itself a violation of ERISA, but was instead a theory to shift liability from a judgment debtor to a third-party. The Court did not address how its holding would impact future alter ego claims.
In Francis A. Lee, the plaintiffs, the trustees of benefit funds governed by ERISA, sought to hold Matt-Con Services (“Matt-Con”), an alter ego of a signatory contractor, liable under ERISA for Matt-Con’s own failure to remit contributions to the funds. Matt-Con moved to dismiss the action arguing that the court lack subject matter jurisdiction over the alter ego claims pursuant to Peacock. Judge Forrest denied the motion, explaining that despite Matt-Con’s arguments to the contrary, Peacock does not deprive all alter ego claims of subject matter jurisdiction. Specifically, Judge Forrest found that subject matter jurisdiction exists where a plaintiff alleges that an alter ego is analytically bound to a signatory’s collective bargaining agreement and that alter ego has failed to make contributions for its own covered work. These claims are, in essence, claims that the alter ego directly violated ERISA, thus giving rise to a quintessential federal question that confers subject matter jurisdiction on the court. The decision in Francis A. Lee is significant because it allows benefit funds continued access to federal courts in their efforts to recover contributions from alter egos of signatory employers.
