Pridy v. Duke Energy Corporation

IN THE UNITED STATES DISTRICT COURT

FOR THE MIDDLE DISTRICT OF TENNESSEE

NASHVILLE DIVISION

DARRELL PRIDY et al., )

)

Plaintiffs, )

)

v. )

)

PIEDMONT NATURAL GAS )

COMPANY, INC., ) Case No. 3:19-cv-00468

) Judge Aleta A. Trauger

And )

)

DUKE ENERGY CORPORATION, as the )

alter ego or successor in liability to )

PIEDMONT NATURAL GAS )

COMPANY, INC., )

)

Defendants. )

MEMORANDUM

Following dismissal of the First Amended Complaint, plaintiffs Local Union 702 of the

United Association of Journeymen and Apprentices of the Plumbing and Pipefitting Industries

(the “Union”) and Union members Darrell Pridy, Gregory Nabors, Michael Sanders, and Randall

Abston (the “individual plaintiffs”), on behalf of themselves and other similarly situated (“class

members”), sought and were granted leave to file their Second Amended Complaint (Doc. No.

26). In it, they bring suit against Piedmont Natural Gas Company, Inc. (“Piedmont Gas” or

“Piedmont”) and Duke Energy Corporation (“Duke Energy”) under Section 502 of the Employee

Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1132(a); the Tennessee Human Rights

Act (“THRA”), Tenn. Code Ann. § 4-12-401; and Section 301 of the Labor Management

Relations Act (“LMRA”), 29 U.S.C. § 185. Now before the court is the defendants’ joint Motion

to Dismiss the Second Amended Complaint. (Doc. No. 29.)

For the reasons set forth herein, the motion will be granted.

I. FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND

The First Amended Complaint named only Duke Energy as a defendant. The court

granted Duke Energy’s Motion to Dismiss the First Amended Complaint on the grounds that it

failed to state a claim against Duke Energy directly and failed to allege facts that, if true, would

establish that Duke Energy was the legal successor to Piedmont Gas or its alter ego. (Doc. Nos.

20, 21.)

Following dismissal of the First Amended Complaint without prejudice and with leave to

amend, the plaintiffs filed their Second Amended Complaint (“SAC”) on December 23, 2019,

naming both Duke Energy and Piedmont Gas as defendants. (Doc. No. 26.) The factual

allegations set forth in the SAC in support of the plaintiffs’ substantive claims are essentially

identical to those set forth in the First Amended Complaint. The SAC, however, adds new

allegations differentiating between Piedmont Gas and Duke Energy and attempting to support the

plaintiffs’ claim that Duke Energy is liable for the wrongful acts of Piedmont Gas on the grounds

that it is either Piedmont Gas’s successor in interest or its alter ego. (Doc. No. 26 ¶¶ 6, 7, 10, 11,

17, 37–53.) And the SAC adds two new “Counts” or claims for relief: one “For Liability on

Behalf of Defendant Duke Energy Under Veil-Piercing/Alter Ego Theory” (id. at Count VI and

¶¶ 96–100), and the second “For Liability on Behalf of Duke Energy as Successor In Interest to

Defendant Piedmont Gas” (id. at Count V and ¶¶ 101–03).

Otherwise, like the First Amended Complaint, the SAC alleges that the individual

plaintiffs are all over the age of forty, have all been employed by Piedmont Gas for many years,

and have “participated in various employee benefit plans, including a welfare benefit plan for

Company1 employees providing sick leave and short-term disability benefits.” (Doc. No. 26 ¶¶

1–4.) During their employment, the individual plaintiffs were continuously members of the

Union and represented by it in collective bargaining. (Id. ¶ 16.) The plaintiffs claim that, “[a]t all

times during [the individual plaintiffs’] employment, [Piedmont Gas] was and continues to be a

party to the collective bargaining agreement with [the Union].” (Id. ¶ 17.) It asserts that Duke

Energy “is also a party to the collective bargaining agreements with [the Union] on the basis that

it is an alter ego and/or successor in liability to Piedmont Gas.” (Id.)

The collective bargaining agreement (“CBA”) in effect from 1989 to 1992 (“1989 CBA”)

between Piedmont Gas and the Union “established a sick leave and short-term disability benefit

plan (‘Plan’)” governed by Section X of that document. (Id. ¶ 19.) According to the plaintiffs,

Section X of the 1989 CBA “and successive collective bargaining agreements are the governing

Plan documents.” (Id.)

The 1989 CBA’s Plan allowed participants to accrue sick leave days and to “bank” the

accumulated days. (Id. ¶ 20.) The 1989 CBA refers to the accrued sick leave account as a

“sickness allowance” (id.), while subsequent CBAs refer to individual accrued sick leave

accounts as “Leave Bank[s].” (Id. ¶ 21.) Nomenclature aside, the benefit plans described in

subsequent CBAs in effect over the ensuing decade continued to adopt a similar sickness

allowance policy, permitting the accrual of hours of unused sick leave and the banking of such

time. The CBA adopted in 1999 and in effect until 2004 (the “1999 CBA”) was the last CBA to

allow the unlimited accrual of sick leave hours. (Id.) The sickness allowance effectively

rewarded individuals who did not take frequent sick leave by allowing them to continue to

accrue an unused allotment by carrying over those hours from year to year. (Id. ¶ 25.)

The CBA that went into effect on December 31, 2004 (“2004 CBA”), eliminated the

1 The term “Company” is defined in the SAC to mean Piedmont Gas. (Doc. No. 26, at 2.)

accumulation of hours in “Leave Banks” going forward, but it allowed participants with hours

already accrued in their Leave Banks to carry over and use that time as described in the 2004

CBA. (Id. ¶ 26.) The Sick Leave provision in the 2004 CBA provided, in relevant part:

Employees are credited with 12 days of sick leave each January 1 to be taken as

needed for any period of illness during the calendar year. They may also use any

accrued sick days in their Leave Bank (sick leave earned before January 1, 2005)

when all of their annual sick days have been used or for a certified FMLA Leave

to care for an immediate family member. Banked days may also be used to cover

the waiting period before short-term disability benefits begin.

(Id. ¶ 27.) According to the plaintiffs, the CBAs in effect from August 2008 through August

2012 (“2008 CBA”) and from August 2012 through August 2018 (“2012 CBA”) similarly

recognized employees’ ability to use Leave Bank time accrued prior to January 2005. (Id. ¶ 28.)

The current CBA (“2018 CBA”) went into effect on April 14, 2018. (Doc. No. 30-4.) The

2018 CBA is silent regarding Leave Banks and leave hours accrued prior to 2005. (See generally

id.) However, in April 2018, Piedmont Gas eliminated an online portal that had allowed

employees to access their Leave Banks, and it began refusing to honor the accrued time in

employees’ Leave Banks. The plaintiffs claim that Piedmont Gas provided no prior notice of this

action. All of the individual plaintiffs and class members had accrued sick leave hours in their

Leave Banks. At least one of the individual plaintiffs requested to use accrued leave time in late

April 2018 but was informed by his supervisor that “the Company no longer allowed employees

to use those benefits.” (Doc. No. 26 ¶¶ 30–32.)

The plaintiffs allege that, during negotiations leading up to execution of the 2018 CBA,

the “Company (represented by officials with both Piedmont Gas and Duke Energy)” and the

Union did not bargain over sick leave and short-term disability benefits that were owed under

prior CBAs. (Id. ¶ 33.) “[I]nstead, the Company unilaterally informed [the Union] that it would

no longer honor accrued Leave Bank benefits in the new collective bargaining agreement, and

unilaterally chose to deny accrued Leave Bank benefits” to the individual plaintiffs and the other

60 class members. (Id.; see also id. ¶ 35.)

Based on these allegations, the plaintiffs claim that Piedmont Gas violated ERISA by

wrongfully denying accrued and nonforfeitable rights to banked sick and disability leave

benefits; discriminated against them on the basis of age, in violation of the THRA; and violated

the LMRA by breaching binding CBAs. It asserts that Duke Energy should be held “jointly and

severally liable with Piedmont Gas” because it is the “alter ego” of Piedmont Gas (id. ¶ 100) or

is its “successor in interest to the applicable collective bargaining agreements” (id. ¶ 103).

The defendants now move for dismissal of the SAC on the grounds that (1) Duke Energy

is not a proper party; (2) the claims brought by both the Union and the individual plaintiffs have

not been exhausted “through the proper grievance and arbitration procedure” provided by the

operative CBA; (3) the individual plaintiffs’ ERISA claim fails because “the program at issue

was a ‘payroll practice,’ not an ERISA-governed welfare plan, and in any event the ‘benefits’

were not vested”; and (4) the individual plaintiffs’ age discrimination claim under the THRA is

preempted by Section 301 of the LMRA. (Doc. No. 29, at 2; see generally Doc. No. 30.)

In their Response, the plaintiffs argue that the defendants’ Motion to Dismiss is improper

under Rule 12(b)(6), as it asks the court to “make inferences about matters not contained in the

[SAC] and to resolve disputes of fact.” (Doc. No. 33, at 4.2) More specifically, they contend that

(1) the new allegations in the SAC are sufficient to establish that Duke Energy is a proper

defendant in this action as either a legal successor to, or alter ego of, Piedmont Gas; (2) they

should be excused from exhausting the contractual grievance procedure as it relates to their

2 The plaintiffs did not consider the case caption page to be the first page of their

Response, as a result of which their pagination and that assigned by CM/ECF is inconsistent. The

court will use the CM/ECF pagination when referring to the plaintiffs’ Response.

ERISA and LMRA claims on the grounds of futility; (3) whether the program at issue was a

“payroll practice” rather than an ERISA-governed welfare plan raises issues of fact that cannot

be resolved in the context of a motion to dismiss, and, alternatively, if the court determines as a

matter of law that the program is a payroll practice, the plaintiffs should be permitted to amend

their pleading to assert a claim under Tennessee law, Tenn. Code Ann. § 50-2-103; and (4) the

THRA claim is not preempted, because it is not “substantially dependent” on the terms of any

CBA.

The defendants have filed a Reply Brief, in which they ask the court to take judicial

notice of public filings with the Securities and Exchange Commission to find that Duke Energy

is the corporate parent, rather than a successor entity or alter ego, to Piedmont Gas. (Doc. No. 36,

at 2.) They also maintain that the plaintiffs have not offered a viable excuse for their failure to

exhaust contractual remedies; amendment of the pleading would be futile because a state-law

claim under Tenn. Code Ann. § 50-2-1-3 would be preempted by the LMRA; and the THRA

claim is likewise preempted.

II. STANDARD OF REVIEW

For purposes of a motion to dismiss under Rule 12(b)(6), the court must take all of the

factual allegations in the complaint as true. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Bell Atl.

Corp. v. Twombly, 550 U.S. 544, 556 (2007) To survive a motion to dismiss, a complaint must

contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its

face. Iqbal, 556 U.S. at 678. A claim has facial plausibility when the plaintiff pleads factual

content that allows the court to draw the reasonable inference that the defendant is liable for the

misconduct alleged. Id. Threadbare recitals of the elements of a cause of action, supported by

mere conclusory statements, do not suffice. Id. When there are well-pleaded factual allegations, a

court should assume their veracity and then determine whether they plausibly give rise to an

entitlement to relief. Id. at 679. A legal conclusion, including one couched as a factual allegation,

need not be accepted as true on a motion to dismiss, nor are mere recitations of the elements of a

cause of action sufficient. Id. at 678; Fritz v. Charter Twp. of Comstock, 592 F.3d 718, 722 (6th

Cir. 2010).

As a general rule, matters outside the pleadings may not be considered in ruling on a

motion to dismiss under Rule 12(b)(6) unless the motion is converted to one for summary

judgment under Rule 56. Fed. R. Civ. P. 12(d). However, when a document is referred to in the

pleadings and is integral to the claims, it may be considered without converting a motion to

dismiss into one for summary judgment. Fed. R. Civ. P. 10(c); Commercial Money Ctr., Inc. v.

Ill. Union Ins. Co., 508 F.3d 327, 335–36 (6th Cir. 2007); Jackson v. City of Columbus, 194 F.3d

737, 745 (6th Cir. 1999). The court may also “consider materials in addition to the complaint if

such materials are public records or are otherwise appropriate for the taking of judicial notice.”

New England Health Care Employees Pension Fund v. Ernst & Young, LLP, 336 F.3d 495, 501

(6th Cir. 2003).

The defendants filed with their Motion copies of the 2004, 2008, 2012, and 2018 CBAs.

(Doc. Nos. 30-1, 30-2, 30-3, 30-4.) Because these documents are referenced in the SAC and are

integral to the plaintiffs’ claims, the court may consider them without converting the defendants’

motion into one for summary judgment.

The court, however, declines to consider the SEC document attached to the defendants’

Reply. (Doc. No. 36-1.) Although it is generally recognized that courts may take judicial notice

of public disclosure documents filed with the SEC, see Bovee v. Coopers & Lybrand C.P.A., 272

F.3d 356, 360 (6th Cir. 2001), judicial notice of a public record is only appropriate if its

“existence or contents prove facts whose accuracy cannot reasonably be questioned.” Passa v.

City of Columbus, 123 F. App’x 694, 697 (6th Cir. 2005). The SEC document filed with the

defendants’ Reply is a Proxy Statement and a Merger Proposal announcing a shareholder

meeting for the purpose of approving a proposed merger agreement pursuant to which Piedmont

Gas would become a wholly-owned direct subsidiary of Duke Energy. It does not establish as a

factual matter that the merger actually took place or that its terms were consistent with those set

forth in the proposal.

III. DISCUSSION

A. Whether Duke Energy Is Properly Named as a Party

1. Successor Liability

In addressing this issue in the context of ruling on Duke Energy’s Motion to Dismiss the

First Amended Complaint, this court stated:

As courts within this circuit and elsewhere have recognized, [s]uccessor liability

enables claimants to seek recourse from the successor that has replaced or entirely

taken over the original entity. On the other hand, if the original entity has not

gone anywhere, there is no successor—and no successor liability.

Pridy v. Duke Energy Corp., No. 3:19-cv-00468, 2019 WL 6329659 (M.D. Tenn. Nov. 26, 2019)

(Trauger, J.) (citations and internal quotation marks omitted).

For the same reasons as those set forth in the referenced opinion, the court finds that the

allegations in the SAC still fail to establish successor liability in this case. According to the

plaintiffs’ allegations, Piedmont Gas has maintained its corporate form, remains a legal entity, is

still the plaintiffs’ employer (or former employer, with respect to those class members who have

already retired), and is the signatory to the CBAs referenced in the SAC. In other words, even if

the court draws all reasonable inferences in the plaintiffs’ favor, the allegations in the SAC make

it clear that Piedmont Gas has not “gone anywhere,” and the court stands by its prior analysis to

find that the allegations in the SAC do not establish “successor liability” on the part of Duke

Energy.

2. Alter Ego Liability

Regarding Count I of the SAC, asserting a claim under 29 U.S.C. § 1132, the Sixth

Circuit recently acknowledged that it has never actually decided which alter ego test applies to

an ERISA claim brought by a labor union—whether the “the alter-ego test of the National Labor

Relations Act of 1935 (“NLRA”), 29 U.S.C. § 151 et seq.,” or the more stringent “corporate law

alter-ego test.” Trustees of Operating Eng’rs Local 324 Pension Fund v. Bourdow Contracting,

Inc., 919 F.3d 368, 374 (6th Cir. 2019), reh’g denied (June 20, 2019); see Rd. Sprinkler Fitters

Local Union No. 669, U.A., AFL-CIO v. Dorn Sprinkler Co., 669 F.3d 790, 794 (6th Cir. 2012)

(noting that the NLRA test “has been described as a ‘more relaxed, less exacting’ application of

the alter-ego doctrine”); Greater Kan. City Laborers Pension Fund v. Superior Gen.

Contractors, Inc., 104 F.3d 1050, 1055 (8th Cir. 1997) (distinguishing between the tests and

applying common law test in ERISA case). Because the defendant in Bourdow affirmatively

argued in the district court that the former applied to the ERISA claim in that case, the Sixth

Circuit declined to review that issue on appeal. Here, too, both parties have presumed that the

“more relaxed” NLRA test may apply in a labor case raising an ERISA claim, so the court does

as well. However, as set forth below, the court also finds that other criteria for applying this test

are not met in this case.

a) The NLRA Alter Ego Test

The Sixth Circuit has long recognized the alter-ego doctrine in the labor context as “an

equitable doctrine that prevents employers from evading their obligations under a CBA by

changing or altering their corporate form.” Trs. of Detroit Carpenters Fringe Benefit Funds v.

Patrie Constr. Co., 618 F. App’x 246, 252 (6th Cir. 2015) (citations and internal quotation marks

omitted). When applied, the doctrine has the effect of “bind[ing] an employer to a collective

bargaining agreement if it is found to be an alter ego of a signatory employer.” Trs. of Detroit

Carpenters Fringe Benefit Funds v. Indus. Contracting, LLC, 581 F.3d 313, 318 (6th Cir. 2009).

The Sixth Circuit, however, has applied it in only two types of situations:

(1) where a “new entity begins operations but is merely a disguised continuance

of the old employer”; and (2) in “double-breasted operations,” i.e., “where two or

more coexisting employers performing the same work are in fact one business,

separated only in form.”

Patrie Constr. Co., 618 F. App’x at 252 (quoting Indus. Contracting, 581 F.3d at 318). In a

“disguised continuance” case, “a new employer that continues the operations of an old

employer” will be bound by the old employer’s obligations under a collective bargaining

agreement “in those cases where the new employer is merely a disguised continuance of the old

employer.” NLRB v. Fullerton Transfer & Storage Ltd., Inc., 910 F.2d 331, 336 (6th Cir. 1990)

(citations and internal quotation marks omitted). And the term “double-breasted operations”

refers to “two or more coexisting employers performing the same work [that] are in fact one

business, separated only in form.” Id.; see, e.g., NLRB v. Allcoast Transfer, Inc., 780 F.2d 576,

582–83 (6th Cir. 1986) (finding that a new corporation formed by the split of an employer’s

moving and storage business into two entities was the alter ego of the employer and, therefore,

bound by its collective bargaining obligations).

Assuming a case follows one of these two models, “[t]he test for determining whether

two companies are alter egos is ‘whether the two enterprises have substantially identical

management, business, purpose, operation, equipment, customers, supervision and ownership.’”

Patrie Constr. Co., 618 F. App’x at 252 (quoting Indus. Contracting, 581 F.3d at 318). However,

if a case “involves neither a disguised continuance situation nor a double-breasted operation . . . ,

the alter ego doctrine is inapplicable.” Int’l Union, UAW v. Aguirre, 410 F.3d 297, 302 (6th Cir.

2005). More specifically, the “more relaxed” NLRA version of the alter ego doctrine is

inapplicable. See id. (considering whether traditional veil-piercing standard applies instead).

b) The NLRA Alter Ego Test Is Not Applicable

As set forth above, Duke Energy is not Piedmont Gas’s successor. For essentially the

same reasons, it is also not a “disguised continuance” of Piedmont Gas, given that Piedmont Gas

remains in existence and is still the individual plaintiffs’ employer. Nor are the two companies

alleged to be engaged in a “double breasted operation,” plaintiffs’ assertions to the contrary

notwithstanding. Instead, as allegations in the SAC make clear, Piedmont Gas is Duke Energy’s

wholly owned subsidiary. (SAC ¶¶ 38, 39.) Accordingly, the relaxed NLRA alter ego test does

not apply to the plaintiffs’ ERISA claim. Accord Aguirre, 410 F.3d at 302.

In Aguirre, the Sixth Circuit rejected the plaintiffs’ argument for applying a “veil piercing

version of the alter ego doctrine,” noting that “[v]eil piercing and alter ego concepts are separate

and distinct.” Aguirre, 410 F.3d at 302. A demand to pierce the corporate veil “ask[s] a court to

hold A vicariously liable for B’s debt.” Id. (citation omitted). “By contrast, a contention that A is

B’s ‘alter ego’ asserts that A and B are the same entity; liability then is not vicarious but direct.”

Id. at 302 (citation omitted). Because that case arose in the labor context but involved “neither a

disguised continuance situation nor a double-breasted operation,” the court held that the NLRA

alter ego doctrine did not apply. It nonetheless moved on to consider whether veil-piercing

applied under the facts as presented there:

We have held that the corporate veil may be pierced if the court finds “substantial

reasons for doing so” after considering three general factors: (1) the amount of

respect given to the separate identity of the corporation by its shareholders; (2) the

degree of injustice visited on the litigants by recognition of the corporate entity[;]

and (3) the fraudulent intent of the incorporators. In analyzing these three general

factors, courts frequently consider more specific factors such as

undercapitalization of the corporation, the maintenance of separate books, the

separation of corporate and individual finances, the use of the corporation to

support fraud or illegality, the honoring of corporate formalities, and whether the

corporation is merely a sham.

Id. (internal quotation marks and citations omitted); see also Fullerton Transfer, 910 F.2d at

336–37 (where the plaintiffs failed to show that the relationship between the defendants fell into

either the “disguised continuance” or “double breasted operations” category, holding that

application of the “relaxed alter ego standard” was not appropriate and, instead, that the plaintiffs

“must rely on more traditional alter ego principles”).3 Based on this authority, the court finds that

traditional veil-piercing standards apply to the plaintiffs’ claims.4

Moreover, even if the “relaxed” alter ego doctrine applied, the plaintiffs have not alleged

facts showing that Duke Energy and Piedmont Gas have “substantially identical management,

business, purpose, operation, equipment, customers, supervision and ownership.” Indus.

Contracting, 581 F.3d at 318. Regarding management, the SAC states: “[Piedmont Gas] shares

the same corporate governance as Duke Energy. Following the closing of the merger, Duke

Energy added Piedmont’s then-current Chairman, President, and Chief Executive Officer,

Thomas E. Skains, to the Duke Energy Board of Directors.” (Doc. No. 26 ¶ 40.) The fact that

Piedmont Gas’s then Chairman, President, and CEO was added to Duke Energy’s Board,

standing alone, does not suggest substantial overlap in the identity of the corporate management

of the two companies. The SAC also alleges that Duke Energy has “integrated Piedmont’s

corporate functions—such as accounting, human resources and information technology—into its

3 The Aguirre parties’ failure to distinguish between alter ego liability and piercing the

corporate veil is unsurprising given that the courts, including the Sixth Circuit, frequently blur

the distinctions between them. See, e.g., Laborers’ Pension Tr. Fund v. Sidney Weinberger

Homes, Inc., 872 F.2d 702, 704 (6th Cir. 1988) (using the terms “alter ego liability” and

“piercing the corporate veil” essentially interchangeably); see also Church Joint Venture, L.P. v.

Blasingame, 947 F.3d 925, 930 (6th Cir. 2020) (identifying the distinction between the two

concepts but also recognizing that “[t]he analysis and effects are similar”).

4 As the defendants argue, Tennessee veil-piercing law would govern their THRA claims.

See Church Joint Venture, L.P. v. Blasingame, 947 F.3d 925, 930 (6th Cir. 2020) (applying

Tennessee veil-piercing law to the plaintiffs’ state law claims). Neither party argues, however,

that there is substantial difference between Tennessee and federal law in this arena. Both, at

bottom, require some suggestion that misuse of the corporate form was used “to work a fraud or

injustice in contravention of public policy.” Rogers v. Louisville Land Co., 367 S.W.3d 196, 215

(Tenn. 2012) (internal citations and quotation marks omitted).

own operating structure.” (Id. ¶ 43; see id. at 44–46.) However, while the SAC does allege facts

showing substantial integration of business operations, it contains no concrete allegations

regarding the scope of business of each company, their respective operations, or the extent to

which they utilize the same equipment or cater to the same customers. The mere fact that

Piedmont Gas is a wholly owned subsidiary of Duke Energy with, as a result, some streamlined

business and operational procedures between the two companies, does not per se establish that

Duke Energy is an alter ego of Piedmont Gas.

The plaintiffs claim that it is of particular importance that Duke Energy was “directly

involved as a bargaining party during the negotiations leading to the formation” of the 2018

CBA and that “Duke Energy representatives refused to bargain over sick leave and short-term

disability benefits granted and owed under prior CBAs.” (Doc. No. 33, at 8 (citing SAC ¶¶ 32,

33).) In fact, the SAC does not allege that Duke Energy was a “bargaining party.” Instead, it

alleges that, during negotiations, Piedmont Gas (“the Company”) was “represented by officials

with both Piedmont Gas and Duke Energy.” (SAC ¶ 33.) It also asserts that Piedmont Gas

declined to “honor accrued Leave Bank benefits in the new collective bargaining agreement.”

(Id.) In addition, Piedmont Gas and the Union are the only signatories to the 2018 CBA. The fact

that Duke Energy representatives were present during labor negotiations does not establish alter

ego status or that Duke Energy should be deemed a party to the 2018 CBA.

More critically, the facts as alleged, accepted as true, do not remotely suggest a misuse of

the corporate form in order to “evade preexisting obligations.” See Trs. of Resilient Floor

Decorators Ins. Fund v. A & M Installations, Inc., 395 F.3d 244, 248 (6th Cir. 2005) (noting that

“an intent to evade” preexisting obligations is “clearly the focus of the alter ego doctrine” in the

labor context). Of particular relevance here is the fact that the relationship between Duke Energy

and Piedmont Gas is not alleged to have any effect on Piedmont Gas’s obligations under the

current or previous CBAs. Similarly, for purposes of piercing the corporate veil (or for finding

alter ego liability under federal common law, outside the labor context), the plaintiffs have made

no showing that any “degree of injustice” or fundamental unfairness might be “visited on the

litigants” by recognition of Piedmont Gas as an independent corporate entity or a refusal to

pierce the corporate veil between the two companies. Aguirre, 410 F.3d at 302.

3. Conclusion–Duke Energy’s Liability

In sum, the SAC does not allege facts sufficient to support alter ego liability on the part

of Duke Energy or that piercing the corporate veil between Piedmont Gas and Duke Energy is

warranted. Duke Energy is not a proper defendant in this action, and Counts IV and V of the

SAC will be dismissed on that basis.

B. Exhaustion of the LMRA Claim

The defendants next argue that, because the Union did not exhaust its contractual

remedies under the operative CBA, as required prior to asserting a claim under § 301 of the

LMRA, 29 U.S.C. § 185, Count III of the SAC must be dismissed. Anticipating the plaintiffs’

response, the defendants maintain that futility does not excuse the failure to exhaust contractual

remedies, because the plaintiffs have an obligation to make a “clear and positive showing of

futility,” which they have not done. (Id. at 17–18 (quoting Miller v. Chrysler Corp., 748 F.2d

323, 326 (6th Cir. 1984)).)

The failure to exhaust is an affirmative defense. Chapman v. UAW Local 1005, 670 F.3d

677, 680 (6th Cir. 2012). Generally, a plaintiff is not required to anticipate and plead facts to

avoid an affirmative defense. Thus, dismissal on the grounds of an affirmative defense is

appropriate only if the operative pleading shows on its face that the claim is barred by the

defense. Riverview Health Inst. LLC v. Med. Mut. of Ohio, 601 F.3d 505, 512 (6th Cir. 2010).

Courts generally cannot grant motions to dismiss on the basis of an affirmative defense unless

the plaintiff has anticipated the defense and explicitly addressed it in the pleadings. Pfeil v. State

St. Bank & Tr. Co., 671 F.3d 585, 599 (6th Cir. 2012), abrogated on other grounds by Fifth

Third Bancorp v. Dudenhoeffer, 573 U.S. 409 (2014).

In this case, the plaintiffs expressly acknowledge in the SAC that they did not exhaust

administrative remedies, thus anticipating the defense, but they also claim to be excused from

compliance with the rule of exhaustion based on futility. (Doc. No. 26 ¶¶ 34, 74, 94.) Likewise,

in their Response to the Motion to Dismiss, they argue that pursuit of the contractual procedure

would have been both futile and “unduly protracted,” essentially because their breach of contract

claim is outside the scope of claims covered by the CBA. (Doc. No. 33, at 11.)

1. The Exhaustion Requirement

The 2018 CBA and the predecessor CBAs from 2004 forward all contain a mandatory

grievance procedure, the final step of which is arbitration, to resolve “any disagreement or

dispute . . . as to the meaning or interpretation of the terms of this Agreement, or as to the rights

of either party hereunder,” unless the procedure is “waived by mutual consent.” (Doc. No. 30-4,

2018 CBA, Art. XII ¶ 1; accord Doc. No. 30-1, 2004 CBA, Art. XIII ¶ 1; Doc. No. 30-2, 2008

CBA, Art. XII ¶ 1; Doc. No. 30-3, 2012 CBA,, Art. XII ¶ 1.) The four-step procedure outlined by

the CBAs includes (1) an informal discussion between the aggrieved employee and/or the Union

Representative and the employee’s immediate supervisor (see, e.g., 2018 CBA Art. XII ¶ 1(a))

and, if that does not resolve the problem, then the Union is to submit the matter in writing to the

employee’s manager (first step); (2) if the matter is not resolved at the first step, then the Union

must “present an appeal in writing . . . to the Managing Director” (id. ¶ 1(b)) (second step); (3)

the Union may appeal the Managing Director’s response to the Managing Director for Human

Resources (id. ¶ 1(c)) (third step); and (4) if the matter is not resolved at the third step, either

party may submit the matter to arbitration (id.). The CBAs further provide that, “[i]f the

aggrieved party (Union) fails to submit the grievance in writing . . . or to appeal to the next step

of the procedure . . . , the grievance shall be deemed not to exist and no action shall be taken by

either party.” (See id. ¶ 1(d).)

As a rule, in the Sixth Circuit and elsewhere, “[a]n aggrieved employee ‘must attempt use

of the contract grievance procedure agreed upon by employer and union as the mode of

redress.’” Miller v. Chrysler Corp., 748 F.2d 323, 325 (6th Cir. 1984) (quoting Republic Steel v.

Maddox, 379 U.S. 650, 652 (1965)). This rule is subject to an exception if the employee

demonstrates that it would be “futile” for him to pursue the contractual remedy. Id. (citations

omitted). A plaintiff, however, must make a “clear and positive showing of futility” before a

court will excuse a failure to exhaust on that basis. Id. at 326 (citation omitted).

It is not sufficient to show “that a party subjectively thought procedures would be futile.”

Emswiler v. CSX Transp., Inc., 691 F.3d 782, 791 (6th Cir. 2012). In discussing the type of proof

necessary to establish futility, the Sixth Circuit has recognized, for example, that an employee

who shows that “the grievance procedures had broken down” may circumvent exhaustion.

Bsharah v. Eltra Corp., 394 F.2d 502, 502–03 (6th Cir. 1968). In addition, an employee who

reasonably relied on his union to file a grievance but the union failed to do so, and the claim

would have been time-barred by the collective bargaining agreement by the time the plaintiff

became aware of that failure, futility may apply. Emswiler, 691 F.3d at 791 (citing Kaschak v.

Consol. Rail Corp., 707 F.2d 902 (6th Cir. 1983)). Or when plaintiffs sought arbitration but were

“refused that remedy by their union,” futility may apply. Id. (citing Nemitz v. Norfolk & W. R.R.

Co., 436 F.2d 841, 850 (6th Cir. 1971)). However, when the plaintiffs could have pursued a

grievance on their own and were not limited by the union’s action or failure to act, a finding of

futility is not warranted. Id. (citing Atkins v. Louisville & Nashville R.R. Co., 819 F.2d 644, 650

(6th Cir. 1987)).

2. Whether Exhaustion in this Case Would Have Been Futile

In this case, the plaintiffs attempt to show futility by analogizing their situation to that of

the plaintiffs in Carpenters Local Union No. 1846 v. Pratt-Farnsworth, Inc., 609 F. Supp. 1299

(E.D. La. 1984). There, the collective bargaining agreement clearly provided that its dispute

resolution procedures applied to disputes “involving an alleged claim of a particular provision of

this Agreement.” Id. at 1301 (emphasis in original). The plaintiffs there sought to “bind related

entities of a signatory employer under the alter ego or the single employer theory.” Id. The

related entities were not actually signatories to the agreement, however, and there was “no clause

present in the agreement allowing claims seeking to bind related entities of a signatory

employer.” Id. The court concluded that, because “[t]he policy of federal labor law is to restrict

arbitration under the collective bargaining agreement to matters which the parties have agreed

voluntarily to arbitrate,” and the non-signatories had not agreed to arbitrate, it logically followed

that “it would have been futile for plaintiffs to pursue the contractual grievance and arbitration

procedures outlined in the collective bargaining agreement.” Id.5

The plaintiffs in this case argue that their situation is similar to that of the plaintiffs in

Pratt-Farnsworth, not because they are attempting to sue a non-signatory to the CBA,6 but

[b]ecause Defendant refused to honor accrued Leave Bank benefits and would not

agree to provide for such benefits in what is now the current agreement [the 2018

CBA],[as a result of which] the current agreement – unlike previous agreements –

contains no reference, either explicit or implicit, to accrued Leave Bank benefits.

Under the grievance procedure in the current agreement, disputes and grievances

5 The opinion contains no further description of the dispute or the relationship between

the parties, as a result of which it has little, if any, persuasive value.

6 Any claim that exhaustion would have been futile because the plaintiffs were suing a

non-signatory would have been untenable. First, notably, the defendants do not argue that the

question of Duke Energy’s alter ego status was covered by the CBAs’ dispute-resolution

provisions or subject to exhaustion. Second, the primary objective of seeking to impose alter ego

status on Duke Energy appears to be to make it subject to the terms of the CBAs as if it were a

signatory.

are limited “to the meaning or interpretation of the terms of this Agreement, or as

to the right of either party hereunder. . . .” Furthermore, “[t]he arbitrator shall

have no authority to add to, modify or detract from the collective bargaining

agreement . . . .”

(Doc. No. 33, at 13 (citing Doc. No. 30-4, 2018 CBA Art. XVI (“Sick Leave”); quoting 2018

CBA Art. XII ¶¶ 1, 4).)

This argument bears some parsing. Count III of the SAC is characterized as “Breach of

Contractual Duty” under 29 U.S.C. § 185, and it is brought exclusively by the Union and not by

the individual plaintiffs. (Doc. No. 26 ¶ 89.) The basis for this claim, as asserted in the SAC, is

as follows: (1) the collective bargaining agreements described in the SAC are binding contracts

between the employer and the Union, covered by 29 U.S.C. § 185; (2) the CBAs collectively

conferred upon the individual plaintiffs and class members a contractual right to accrued sick

leave and disability benefits; (3) Piedmont Gas breached those agreements by unilaterally

terminating the named plaintiffs’ and class members’ Leave Banks and “otherwise refusing to

honor [their] accrued benefits under these agreements”; and (4) the breach of the CBAs is

actionable under § 185. (SAC ¶¶ 90–92.) In other words, the SAC itself clearly references, not

only the 2018 CBA, but also all the predecessor CBAs that purportedly created the Leave Bank

rights. However, despite this language in the SAC, the plaintiffs’ futility argument in their

Response to the Motion to Dismiss is based solely on the 2018 CBA. They assert that, because

disputes subject to the grievance procedure in the 2018 CBA are limited to disputes related to the

interpretation of that CBA or the rights of any party thereto, and no provision of the 2018 CBA

actually incorporates reference to Leave Banks, “it would have been futile” for the Union or the

individual plaintiffs to attempt to exhaust contractual remedies through the grievance procedures

set forth in the 2018 CBA. (Id. ¶ 94.)

The problem with the plaintiffs’ position is at least two-fold. First, 29 U.S.C. § 185(a),

the statute under which the Union brings Count III, provides, in relevant part, that “suits for

violation of contracts between an employer and a [union] may be brought in any district court of

the United States having jurisdiction of the parties, without respect to the amount in controversy

or without regard to the citizenship of the parties.” 29 U.S.C. § 185(a). In other words, the statute

creates a federal venue for what would otherwise likely be a garden variety breach of contract

action governed by state law. To bring such a claim, a plaintiff must actually allege breach of a

collective bargaining agreement. See Textron Lycoming Reciprocating Engine Div., Avco Corp.

v. UAW, 523 U.S. 653, 656 (1998) (“By its terms, this provision [§ 185(a)] confers federal

subject-matter jurisdiction only over “[s]uits for violation of contracts.”).7 Here, the Union

argues that it is bringing suit for breach of the 2018 CBA while at the same time recognizing that

the contractual provision it seeks to enforce is not actually contained in the subject contract. (See

SAC ¶ 94 (“No provision in the 2018 CBA explicitly or implicitly references or incorporates

accrued sick leave, sick bank, or leave bank benefits.”).) On this basis, they claim that it would

have been futile to attempt to seek relief through the grievance procedures in the 2018 CBA. (See

id. (“Because the CBA does not contain any of these terms, it would have been futile for [the

Union] to obtain relief through the grievance procedure or exhaust their administrative

remedies.”).)

As a matter of logic, however, a party cannot bring suit for breach of contract while also

admitting that there was no breach, and a defendant cannot be charged with breaching a

7 In Winnett v. Caterpillar, Inc., 553 F.3d 1000 (6th Cir. 2009), the Sixth Circuit, without

expressly acknowledging Textron, held based on Arbaugh v. Y & H Corp., 546 U.S. 500 (2006),

that the failure to allege the existence of an operative collective bargaining agreement did not

create a jurisdictional defect but, instead, affected the merits of the claim. As the Fifth Circuit

later observed, however, Winnett “did not recognize that under Textron, section 301(a)

jurisdiction requires an alleged labor contract violation.” Houston Ref., L.P. v. United Steel Mfg.,

765 F.3d 396, 404 (5th Cir. 2014). Regardless, the court does not find here that it lacks

jurisdiction over the plaintiffs’ claims.

contractual obligation that is not, either “explicitly or implicitly” imposed by the subject

contract. (Id.) The futility demonstrated here has nothing to do with the grievance procedure

itself; rather, it is the futility of bringing a breach of contract claim to enforce an admittedly non-

existent agreement. The Union cannot have it both ways. Either it is suing for breach of contract,

in which case it is subject to the grievance procedures contained in the contract, or it is not, in

which case it fails to state a claim under § 185(a) at all. In either event, to the extent Count III of

the SAC is based on a purported breach of the 2018 CBA, it is subject to dismissal.

In addition, as suggested above, the plaintiffs’ position actually appears to be that

Piedmont Gas had no ability to repudiate what the individual plaintiffs contend to be vested

leave rights created by the preceding CBAs.8 As indicated above, Count III of the SAC

references the CBAs in the plural, and it asserts that the Union “brings its separate cause of

action . . . to remedy Defendants’ breach of their collective bargaining agreements by unilaterally

terminating sick leave and disability benefits and otherwise refusing to honor employees’

accrued benefits.” (SAC at 2.) The plaintiffs explain that, “[d]uring negotiations” leading to the

formation of the 2018 CBA, Piedmont Gas and the Union

did not bargain over sick leave and short-term disability benefits that were owed

under prior collective bargaining agreements; instead, the Company unilaterally

informed [the Union] that it would no longer honor accrued Leave Bank benefits

in the new collective bargaining agreement, and unilaterally chose to deny

accrued Leave Bank benefits to Named Participants and Class members.

(Doc. No. 26 ¶ 33.) Based on this language, the SAC may reasonably be construed as alleging

that the 2012 CBA (or prior CBAs) created vested benefits that the employer was not entitled to

modify or abolish in subsequent agreements, in which case the Union’s claim would arguably be

based upon breach of the prior CBAs rather than the 2018 CBA per se. The plaintiffs, however,

8 The SAC repeatedly uses the term “accrued” rather than “vested,” but the court

construes the pleading as alleging that the individual plaintiffs and class members had vested

benefits that could not be unilaterally terminated by Piedmont Gas.

have not attempted to argue that exhaustion of their claims under the prior CBAs would have

been futile. Even if they had, the provisions they seek to enforce actually are included in the

prior CBAs (see, e.g., 2012 CBA Art. XVI (“Employees must use any accrued sick days in their

Leave Bank (sick leave earned before January 1, 2005) when all of their annual sick days have

been used . . . .”), and the question of whether the prior CBAs created vested, and therefore no-

retractable, benefits appears to fall squarely within the scope of matters subject to the grievance

procedures outlined in the contract: “any disagreement or dispute . . . as to the meaning or

interpretation of the terms of this Agreement, or as to the rights of either party hereunder” (id.

Art. XII ¶ 1). Thus, if Count III of the SAC is construed as asserting an actual breach of any of

the earlier CBAs, the plaintiffs have failed to show futility with respect to these agreements as

well.

3. Conclusion: Count III Must Be Dismissed

Because the affirmative defense of failure to exhaust is clear from the face of the SAC

and the plaintiffs have failed to allege facts that, if true, would establish that exhaustion would

have been futile, the plaintiffs’ claim in Count III under 29 U.S.C. § 185(a) is subject to

dismissal.

C. The ERISA Claim

The defendants argue that the plaintiffs’ ERISA claim is likewise subject to dismissal for

failure to exhaust and, alternatively, that the sick leave program that is the subject of the

plaintiffs’ claims was a “payroll practice” rather than an ERISA-governed welfare plan. Finding

the first argument to be meritorious, the court does not reach the second.

1. Exhaustion

The defendants argue that the individual plaintiffs’ ERISA claim, set forth in Count I of

the SAC, is also subject to mandatory exhaustion under the contractual procedures set forth in

the operable CBA. They argue that the plaintiffs, besides failing to establish futility, cannot skirt

the grievance procedures by characterizing their claims as “class claims,” since the unavailability

of classwide arbitration procedures is not a basis to invalidate an agreement to arbitrate.

In response, the plaintiffs do not contend that their ERISA claim is not subject to

exhaustion. Instead, they argue that exhaustion would be futile, for the same reason that

exhaustion of their LMRA claim would be futile. In addition, they maintain that the individual

plaintiffs have made class allegations and that the CBA does not provide for arbitration of

classwide disputes.9 They posit that none of the individual class members has consented to

classwide arbitration and that, even if the plaintiffs had “sought to arbitrate their grievance of

their ERISA claims on a class-wide basis, the case law makes it all but certain they would have

been barred from doing so.” (Doc. No. 33, at 14.)

In the Sixth Circuit, “[i]n the context of a labor dispute, ‘we begin with the presumption

that national labor policy favors arbitration.’” VanPamel v. TRW Vehicle Safety Sys., Inc., 723

F.3d 664, 667 (6th Cir. 2013) (quoting United Steelworkers of Am. v. Cooper Tire & Rubber Co.,

474 F.3d 271, 277 (6th Cir. 2007)). This “presumption of arbitrability applies to disputes over

retirees’ benefits if the parties have contracted for such benefits in their collective bargaining

agreement and if there is nothing in the agreement that specifically excludes the dispute from

arbitration.” Id. at 668 (quoting Cleveland Elec. Illuminating Co. v. Util. Workers Union Local

270, 440 F.3d 809, 816 (6th Cir. 2006)). In this case, the plaintiffs allege that the welfare benefits

to which they claim entitlement were created by the CBAs between Piedmont Gas and the

Union. As such, the claim is subject to contractual exhaustion and arbitration, unless some

9 In the SAC, the plaintiffs assert that exhaustion is excused because Piedmont Gas has

“made it administratively impossible for the [individual plaintiffs] or other Class members to file

for Plan benefits.” (SAC ¶ 74.) The court construes this language as alleging futility.

exception to the exhaustion rule applies. In light of the plaintiffs’ apparent concession of the

issue and the absence of any indication in the CBAs of an intent to exclude benefits claims from

arbitration, the court concludes that the ERISA claim falls within the scope of those claims that

are subject to the grievance procedures set forth in the various CBAs.

2. No Exception to Exhaustion and Arbitration Applies

The plaintiffs’ futility argument is foreclosed based on the same reasoning that applied to

their LMRA claim. The plaintiffs also claim that exhaustion is excused because they bring class

claims.

The plaintiffs are correct that, “[u]nless the parties have explicitly agreed to class-wide

arbitration, it cannot be compelled,” and “[m]ere silence on the issue does not constitute

consent.” (Doc. No. 33, at 14 (citing Stolt–Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S.

662, 687 (2010); Reed Elsevier, Inc. v. Crockett, 734 F.3d 594, 599 (6th Cir. 2013)).) However,

the Supreme Court has also held that the unavailability of classwide arbitration procedures is not

a basis for invalidating an agreement to arbitrate. See Epic Sys. Corp. v. Lewis, 138 S. Ct. 1612,

1631 (2018) (“Our precedent clearly teaches that a contract defense ‘conditioning the

enforceability of certain arbitration agreements on the availability of classwide arbitration

procedures’ is inconsistent with the Arbitration Act and its saving clause.” (quoting AT&T

Mobility LLC v. Concepcion, 563 U.S. 333, 336 (2010))). The absence of an agreement to

arbitrate classwide claims therefore does not mean that the plaintiffs can avoid arbitration by

bringing class claims. See McGrew v. VCG Holding Corp., 735 F. App’x 210, 211 (6th Cir.

2018) (dismissing class action and compelling individual arbitration based on Epic).

In short, bringing class claims is not a recognized exception to the exhaustion

requirement. The plaintiffs’ ERISA claim is subject to dismissal on this basis.

D. THRA Claim

In Count II of the SAC, the individual plaintiffs assert a claim of age discrimination in

violation of the THRA, Tenn. Code Ann. § 4-21-401(a)(1). Section 4-21-401(a)(1) makes it “a

discriminatory practice for any employer to . . . discriminate against an individual with respect to

compensation, terms, conditions or privileges of employment because of such individual’s . . .

age.” In support of this claim, the plaintiffs allege that (1) they and the class members they

represent are all over the age of 40 (SAC ¶ 80); (2) they earned and were entitled to the benefits

provided to them pursuant to the “Plan” (id. ¶ 81), which is defined in the SAC as the “sick leave

and short-term disability benefit plan” established by the “collective bargaining agreement in

effect from 1989 to 1992” and continuing through successive CBAs (see id. ¶¶19–26, 34); (3)

Piedmont Gas violated § 4-21-401 by “discriminatorily eliminating employee benefits”—i.e., the

accrued Leave Bank benefits—“as to only its oldest employees” and “did not reduce sick or

disability benefits for younger employees” (SAC ¶ 82); (4) age was a primary motivating factor

in Piedmont’s decision, “because the only employees affected by the Company’s adverse

employment action were, upon information and belief, over the age of forty, and who had the

most seniority with [t]he Company” and because the individual plaintiffs and class members, “as

employees over the age of forty, are far more likely than younger employees to use sick and

disability benefits for the treatment of their medical conditions” ( id. ¶¶ 83–84).10

The defendants assert that this claim must be dismissed as preempted by the LMRA,

because it “arises solely out of the Union’s and Piedmont Gas’s collective bargaining efforts”

and, as such, “is inextricably intertwined with the parties’ CBA and their collective bargaining

10 Although this claim is not characterized as being asserted in the alternative to their

other claims, it appears to be factually incompatible with the other claims insofar as the support

for it includes an allegation that Piedmont actually terminated the benefit in question. The other

claims maintain that the Leave Bank benefit had actually vested and that Piedmont did not have

the ability to terminate it.

efforts generally.” (Doc. No. 30, at 22.) The plaintiffs respond that the THRA claim is not

preempted, because resolution of this claim will not “require[e] the [c]ourt to interpret the sick

bank provisions in the CBA.” (Doc. No. 33, at 10.)

Section 301 of the Labor Management Relations Act authorizes district courts to hear

“[s]uits for violation of contracts between an employer and a labor organization representing

employees in an industry affecting commerce . . . without respect to the amount in controversy or

without regard to the citizenship of the parties.” 29 U.S.C. § 185(a). This section “governs claims

founded directly on rights created by collective-bargaining agreements, and also claims

substantially dependent on analysis of a collective-bargaining agreement.” Caterpillar Inc. v.

Williams, 482 U.S. 386, 394 (1987) (internal quotation marks and citation omitted). To this end,

“when resolution of a state-law claim is substantially dependent upon analysis of the terms of an

agreement made between the parties in a labor contract, that claim must either be treated as a

§ 301 claim, or dismissed as pre-empted by federal labor-contract law.” Allis-Chalmers Corp. v.

Lueck, 471 U.S. 202, 220 (1985) (internal citation omitted).

The Sixth Circuit has adopted a two-step analysis for determining whether Section 301

preemption applies:

First, courts must determine whether resolving the state-law claim would require

interpretation of the terms of the labor contract. If so, the claim is preempted.

Second, courts must ascertain whether the rights claimed by the plaintiff were

created by the labor contract, or instead by state law. If the rights were created by

the labor contract, the claim is preempted. In short, if a state-law claim fails either

of these two requirements, it is preempted by § 301.

Paul v. Kaiser Found. Health Plan of Ohio, 701 F.3d 514, 519 (6th Cir. 2012) (brackets and

citations omitted).

Despite this relatively clear statement, the question of whether a state law claim is

“substantially dependent” on analysis of a collective bargaining agreement is not always

straightforward. The Supreme Court has held that, “[e]ven if dispute resolution pursuant to a

collective-bargaining agreement, on the one hand, and state law, on the other, would require

addressing precisely the same set of facts, as long as the state-law claim can be resolved without

interpreting the agreement itself, the claim is ‘independent’ of the agreement for § 301 pre-

emption purposes.” Lingle v. Norge Div. of Magic Chef, Inc., 486 U.S. 399, 409–10 (1988)

(footnote omitted). Generally, “[i]f the plaintiff can prove all of the elements of his claim without

the necessity of contract interpretation, then his claim is independent of the labor agreement.”

DeCoe v. Gen. Motors Corp., 32 F.3d 212, 216 (6th Cir. 1994)

The Sixth Circuit has applied the two-prong test several times in the context of state-law

discrimination claims—first in Smolarek v. Chrysler Corp., 879 F.2d 1326 (6th Cir. 1989), a

consolidated appeal involving two cases in which the plaintiff employees filed suit against the

employers in state court for discrimination under a Michigan statute prohibiting disability

discrimination and for workers’ compensation retaliation. In reversing the district courts’

determinations that the claims were preempted by the LMRA, the Sixth Circuit reviewed the

Supreme Court’s decisions in Allis–Chalmers Corp. and Lingle, among others. It recognized that

the question of whether a state-law claim asserting a right that relates in some way to a provision

of a CBA is preempted may turn on whether the state law claim is “inextricably intertwined with

consideration of the terms of the labor contract” or whether, instead, the employment dispute

only “tangentially involve[es]” a CBA provision. Smolarek, 879 F.2d at 1330 (quoting Allis-

Chalmers, 471 U.S. at 213, 211). The court held that the fact that a CBA might provide the same

relief as the state law was not sufficient to trigger preemption where the plaintiff sought relief

solely under the state law. Id. at 1332–33. In addition, the fact that the employer raised terms of

the CBA as a defense to a plaintiff’s claim also did not establish that proof of the claims

themselves was dependent on interpretation of the CBA. Id. at 1333.

In Paul v. Kaiser Found. Health Plan of Ohio, 701 F.3d 514, 520 (6th Cir. 2012), the

court found that the “same considerations appl[ied] with equal force.” There, the plaintiff

asserted claims for disability discrimination and retaliation under state law. The defendant

claimed preemption on the basis that the plaintiff’s claims implicated rights under the collective

bargaining agreement. The Sixth Circuit disagreed, noting that the plaintiff,

as master of her claims, is entitled to assert her claims for relief exclusively under

state law. However, if resolution of her claims is “substantially” dependent on

analysis of terms of the CBA, then her claims are subject to complete preemption.

The district court was thus required to look beyond the face of plaintiff’s

allegations and the labels used to describe her claims and had to evaluate the

substance of plaintiff’s claims.

Id. at 519 (internal citation omitted). In reviewing the substance of the plaintiff’s claims, the

court found it significant that the complaint “assert[ed] rights exclusively under Ohio’s anti-

discrimination civil rights law,” did not mention the collective bargaining agreement, and did not

invoke rights or procedures under the collective bargaining agreement. Id. at 520. While the

defendant invoked the terms of the CBA in defending against the claim and justifying its own

actions, the court held that the defendant’s “reliance on the CBA as a defense is, in itself,

insufficient to trigger preemption.” Id. at 521. It was also relevant that the plaintiff sought

damages and other forms of relief available under the state statute. She did not seek

reinstatement, which the court recognized “might have implicated her rights under the CBA.” Id.

“This distinction underscores the fact that plaintiff is not asking the court to manage her CBA-

governed relationship with her employer, but is asking for enforcement of rights under state anti-

discrimination law independent of the CBA.” Id.

The court in Paul also addressed the distinction between “tangentially related” and

“inextricably intertwined”:

[P]reemption is required, even though resolution of a state law claim “will not

involve the direct interpretation of a precise term of the CBA,” if it will

nonetheless require the court “to address relationships that have been created

through the collective bargaining process and to mediate a dispute founded upon

rights created by a CBA.”

Id. at 522 (quoting DeCoe v. Gen. Motors Corp., 32 F.3d 212, 218 (6th Cir. 1994)). In Paul, the

defendant failed to show that that plaintiff’s claim would require the court to address the

relationship created by the CBA or to show that the CBA was more than tangentially related to

the plaintiff’s claims.

Conversely, in Paluda v. ThyssenKrupp Budd Co., 303 F. App’x 305, 309 (6th Cir.

2008), the Sixth Circuit affirmed the district court’s order denying a motion to remand to state

court and granting a motion to dismiss on the basis of LMRA preemption. There, a group of

plaintiffs brought suit asserting reverse age discrimination claims under state law, but their claim

was based on their classification under a Plant Closing Agreement that was incorporated into and

made part of an existing CBA. In conducting the two-step inquiry prescribed by Sixth Circuit

precedent, the court acknowledged that the plaintiffs’ right to be free from age discrimination did

not arise under the CBA. Id. at 309. Nonetheless,

[i]n contrast to typical claims of retaliatory or discriminatory discharge, . . .

plaintiffs have alleged discrimination in the allocation of benefits under the Plant

Closing Agreement. As defendants argue, plaintiffs’ prima facie showing of age

discrimination would require proof that plaintiffs were similarly situated to those

employees who qualified for treatment as Group B employees under the Plant

Closing Agreement and, in turn, whether they were eligible for Mutual Consent

Early Retirement Benefits as defined by the Collective Bargaining Agreement, as

modified by letter agreement.

Id. at 309 (internal citations omitted). Thus, because the plaintiffs’ age discrimination claims

were “substantially dependent on analysis of a collective bargaining agreement,” it was

completely preempted by the LMRA. Id.

More recently, in Slinker v. Jim Beam Brands Co., 689 F. App’x 406 (6th Cir. 2017), the

Sixth Circuit again held that the plaintiff’s age discrimination claim was preempted because it

required interpretation of the parties’ CBA. There, the plaintiff was terminated for failing a drug

screen after an on-the-job accident. He filed suit claiming age discrimination in violation of

Kentucky law. His complaint alleged that the employer had administered the drug tests in

violation of the policies and procedures for such tests set forth in the CBA and, more

specifically, that the drug testing policy had been inconsistently enforced. He alleged that a

younger employee involved in a forklift accident had not been promptly drug tested. The district

court granted summary judgment for the defendant on the age discrimination claim, finding that

the employee’s “allegation of disparate treatment under the drug testing policy would require

interpreting the terms of the collective bargaining agreement, and thus Section 301 of the

[LMRA] preempted the claim.” Id. at 407.

The Sixth Circuit agreed that the plaintiff’s complaint “plainly falls within the first

prong” of the test as articulated above: that “resolving the state-law claim would require

interpretation of the terms of the labor contract.” Id. at 408 (quoting Paul, 701 F.3d at 519). The

court continued:

Slinker’s complaint amply suggests interpretation of the union contract’s drug-

testing article is required to adjudicate his claim under Kentucky law—he

complains that Jim Beam drug tested him in a manner that “violat[ed] . . . the

policy and procedures outlined in the Collective Bargaining Agreement,” while at

the same time Jim Beam delayed a drug test for a younger co-worker also “in

violation of the collective bargaining agreement. . . .” Determining whether Jim

Beam complied with the union contract when it drug tested plaintiff and his co-

worker necessarily requires interpreting the drug-testing provision of the contract.

Because “plaintiff can[not] prove all of the elements of his claim without the

necessity of contract interpretation”—i.e., whether Jim Beam treated an alleged

comparator differently—Section 301 preempts his claim . . . .

Id. at 408–09 (citations omitted).

In the case at bar, the defendants argue that the plaintiffs’ age discrimination claim, like

that in Slinker, “unavoidably requires interpretation of the parties’ CBAs,” as confirmed by the

SAC itself, which alleges that the plaintiffs “earned and were entitled to the benefits provided

them pursuant to the Plan.” (Doc. No. 30, at 24 (quoting SAC ¶ 81.) The defendants also argue

that the plaintiffs’ allegations that Piedmont Gas alone “controlled the terms of employment” for

the individual plaintiffs and class members constitutes an attempt to minimize the Union’s

involvement in the process, given that it is the CBAs that address such issues as benefit plans,

vacation, holidays, sick leave, and parental leave, “all of which are, broadly considered,

employee benefits” that were negotiated as part of the collective bargaining process and agreed

to by the Union. (Id.) The defendants also point out that the plaintiffs’ claims arise, in their

entirety, from the fact that the 2012 and previous CBAs reference carried-over sick leave but the

2018 CBA does not.

For their part, the plaintiffs contend that their claim does not require interpretation of the

CBAs but requires, instead, an inquiry into Piedmont’s conduct and motives in eliminating the

Leave Banks. They argue that their claim is more closely analogous to that of the plaintiffs in

Lingle and Smolarek than Slinker or Paluda.

A prima facie case of age discrimination under the THRA is identical to that under

federal law. See Bender v. Hecht’s Dept. Stores, 455 F.3d 612, 620 (6th Cir. 2006); Frye v. St.

Thomas Health Servs., 227 S.W.3d 595, 610 (Tenn. Ct. App. 2007) (citing McDonnell Douglas

Corp. v. Green, 411 U.S. 792, 802 (1973). A plaintiff may establish a prima facie case of age

discrimination by showing that (1) he is forty years of age or older, (2) was qualified for his

position, and (3) suffered an adverse employment action (4) “under circumstances giving rise to

an inference of discrimination based on age.” Yount v. FedEx Express, No. W2015-00389-COA-

R3-CV, 2016 WL 1056958, at *5 (Tenn. Ct. App. Mar. 17, 2016) (citing Wilson v. Rubin, 104

S.W.3d 39, 52 (Tenn. Ct. App. 2002)). The fourth element “can be established by producing

evidence that the plaintiff was replaced by a substantially younger employee or treated less

favorably than a similarly situated, younger employee was treated.” Id. (citing Bundy v. First

Tenn. Bank Nat. Ass’n, 266 S.W.3d 410, 417 (Tenn. Ct. App. 2007).

Primarily at issue here are the third and fourth prongs: whether the plaintiffs suffered an

adverse employment action under circumstances giving rise to an inference of discrimination.

The plaintiffs argue that the CBA is only tangentially related to this question, because the real

issue is Piedmont’s conduct and motives in eliminating the Leave Bank, which does not require

interpretation of the CBAs. The defendants contend that the Leave Bank “was a feature of the

parties’ Sick Leave provision in the 2012 CBA” but eliminated from the 2018 CBA and replaced

with a different sick leave benefit as a “product of collective bargaining.” (Doc. No. 36, at 8.)

They argue that the plaintiffs “cannot challenge Defendants’ motive for a collectively bargained

contractual term without implicating the underlying CBAs and the negotiating process leading up

to them.” (Id.)

The court finds that this case is more closely aligned with Slinker or Paluda than Paul or

Smolarek. In Paul, the court found it significant that the plaintiff “assert[ed] rights exclusively”

under state law, did not reference the collective bargaining agreement, and did not invoke her

rights or procedures under such an agreement. Paul, 701 F.3d at 520. Here, in contrast, the

plaintiffs assert rights under both the LMRA and state law; they reference the CBAs extensively,

including in support of their THRA claim; and, again within the context of the THRA claim, they

invoke rights created by the CBAs—the right to use accrued sick leave benefits (the Leave Bank)

and the elimination of those rights in the 2018 CBA.

That is, although the plaintiffs’ right to be free from discrimination on the basis of age is

indisputably a right created by state (and federal) law independent of the CBA, the particular

“right” claimed in the SAC was created solely by the CBAs: the right to accumulate and then

bank and “carry over” sick leave hours accumulated prior to 2005. In that sense, their claim, like

that in Paluda, is based on a classification created by the CBAs themselves. See Paluda, 303 F.

App’x at 309 (finding that the resolution of the plaintiffs’ claim would require analysis of

whether they were similarly situated to other employees who met the classification the plaintiffs

sought and, therefore, was “substantially dependent on analysis of a collective bargaining

agreement”). And in this case, too, to prove their claim, the plaintiffs would likely have to show

that they were treated disparately from similarly situated employees outside the protected class.

See Yount, 2016 WL 1056958, at *5. Doing so would require a close inspection of the leave

rights created by the 2018 CBA.

Moreover, the proof the plaintiffs offer in support of discriminatory conduct is the

employer’s allegedly inequitable application of the leave policy created by the CBAs. To prove

motive, which they claim to be critical, the plaintiffs will likely have to delve into the collective

bargaining process itself—and the Union’s involvement in that process and ultimate decision to

accept a CBA that eliminated employees’ right to use leave hours accrued prior to 2005. Thus,

the CBAs and the collective bargaining process are not tangentially related to the plaintiffs’ age

discrimination claim. They are inextricably intertwined. Even if resolution of the claim might not

“involve the direct interpretation of a precise term of the CBA,” it will inescapably require the

court “to address relationships that have been created through the collective bargaining process

and to mediate a dispute founded upon rights created by a CBA,” Paul, 701 F.3d at 522 (citation

omitted) (emphasis added), specifically, the Leave Bank benefits and the decision made during

the course of negotiations—as reflected in the final version of the 2018 CBA—not to continue

recognizing those rights.

Because the plaintiffs’ age discrimination claim is inextricably intertwined with the 2018

CBA and the collective bargaining process, including the negotiations leading to execution of the

2018 CBA, the THRA claim is preempted in its entirety by the LMRA, 29 U.S.C. § 185(a). As

such, it is subject to dismissal.

33

IV. CONCLUSION

For the reasons set forth herein, the defendants’ Motion to Dismiss will be granted and

this case dismissed. All claims against Duke Energy and the THRA claim against Piedmont Gas

will be dismissed with prejudice. The LMRA and ERISA claims will be dismissed without

prejudice to the plaintiffs’ ability to attempt to redress them through the contractual process

created by the operative CBAs.

An appropriate order is filed herewith.

be eg

United States District Judge