United States District Court, S.D. New York
October 4, 2005.
UFCW LOCAL 174 COMMERCIAL HEALTH CARE FUND, UFCW LOCAL 174 PENSION FUND, UFCW LOCAL 174 COMMERCIAL PENSION FUND, UFCW LOCAL 174 SECURITY BENEFIT FUND, UFCW LOCAL 342 ANNUITY FUND, UFCW LOCAL 342 HEALTH CARE FUND, UFCW LOCAL 342 SECURITY BENEFIT FUND and UFCW LOCAL 342 LEGAL FUND, Plaintiffs,
HOMESTEAD MEADOWS FOODS CORP., HARRY CAPITAL, INC., FORD MEATS, LLC, HERITAGE FOOD GROUP, INC., BRIAN M. WEINER (Individually) and MARTIN WEINER (Individually), Defendants.
The opinion of the court was delivered by: DENISE COTE, District Judge
MEMORANDUM OPINION & ORDER
Eight employee benefits plans seek to recover assets that they
claim were unlawfully transferred in an effort to shield them
from an outstanding judgment. As all the counts plead by the
plaintiffs arise under state law, the Court requested that the parties submit briefing on the issue of subject matter
jurisdiction. Because the plaintiffs seek to collect a judgment
issued by this Court by tracing the judgment debtor's assets into
the hands of a third party, there is subject matter jurisdiction
over this action.
In UFCW Local 174 Commercial Health Care Fund v. BMW Meats,
LLC, 05-cv-4030, this Court confirmed three arbitration awards
against BMW Meats, LLC ("BMW Meats") for failure to make
contributions to the UFCW Local 174 Commercial Health Care Fund,
UFCW Local 174 Pension Fund, UFCW Local 174 Commercial Pension
Fund, UFCW Local 174 Security Benefit Fund, UFCW Local 342
Annuity Fund, UFCW Local 342 Health Care Fund, UFCW Local 342
Security Benefit Fund, and UFCW Local 342 Legal Fund (the
"Funds"). The plaintiffs in the current action are the same Funds
that were the plaintiffs in the first action. They bring this
second action against four corporations including Homestead
Meadows Foods Corp. ("Homestead Foods"), and two individuals. The
plaintiffs allege that on or about the day that the judgment
issued against BMW Meats, all of that company's assets were
transferred to Homestead Foods. The plaintiffs claim the transfer
was fraudulent and for the purpose of protecting BMW Meats'
assets from the judgment against it. They also assert that
Homestead Foods is the successor to BMW Meats, both of which are
owned directly or indirectly by the two individual defendants in the second action.
A case is properly dismissed for lack of subject matter
jurisdiction "when the district court lacks the statutory or
constitutional power to adjudicate it." Makarova v. United
States, 201 F.3d 110, 113 (2d Cir. 2000). A plaintiff asserting
subject matter jurisdiction must prove that it exists by a
preponderance of the evidence. Id. In considering whether to
dismiss a case for lack of subject matter jurisdiction a court
must accept as true all material factual allegations in the
complaint. Shipping Financial Services Corp. v. Drakos,
140 F.3d 129, 131 (2d Cir. 1998). On the other hand, a court may not
draw inferences from the pleadings favorable to the plaintiffs'
assertion of jurisdiction. Id. When federal question
jurisdiction is premised on a federal cause of action,
jurisdiction exists whenever the complaint states a cause of
action under federal law that is neither "clearly immaterial and
made solely for the purpose of obtaining jurisdiction," nor
"wholly insubstantial and frivolous." Lyndonville Sav. Bank &
Trust Co. v. Lussier, 211 F.3d 697, 701 (2d Cir. 2000) (citation
In Epperson v. Entertainment Express, Inc., 242 F.3d 100 (2d
Cir. 2001), the Second Circuit recognized a "distinction for
jurisdictional purposes . . . between an action to collect a
judgment . . . and an action to establish liability on the part
of a third party." Id. at 104. An action to collect a judgment "does
not require an independent jurisdictional basis." Id. Thus, a
judgment creditor may pursue, through a federal court's ancillary
jurisdiction, "the assets of the judgment debtor even though the
assets are found in the hands of a third party." Id. at 106.
The Supreme Court's decision Peacock v. Thomas, 516 U.S. 349
(1996), is not to the contrary. In Peacock the Court held that
district courts lacked ancillary jurisdiction over actions that
sought to "impose liability for a money judgment on a person not
otherwise liable for the judgment." Id. at 351. As the Second
Circuit noted in Epperson, the Court in Peacock left open the
question of whether "claims to void fraudulent transfers required
an independent basis for jurisdiction." Epperson,
242 F.3d at 106. The holding in Epperson makes clear that in this Circuit
if the action is to collect a judgment and not to establish the
liability of a third party, it falls within the ancillary
jurisdiction of the district court. Id. at 104 (citing Empire
Lighting Fixture Co. v. Practical Lighting Fixture Co.,
20 F.2d 295, 296 (2d Cir. 1927)).
The plaintiffs seek through their assertions of fraudulent
conveyance to collect the judgment entered against BMW Meats by
tracing BMW Meats' assets into the hands of related third
parties. The complaint seeks to enforce a judgment rather than to
"raise an independent controversy with a new party." Id. at
106. This is sufficient to support jurisdiction. Conclusion
Subject matter jurisdiction exists to hear this case.
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