Rule 9(b) does not apply to alter ego allegations.
Likewise, the Court denies Sellergren's motion to dismiss for failure to state a claim for piercing the corporate veil. Plaintiffs' satisfy the first prong of the Illinois standard with the following allegations:
(1) the transfer of funds between Sellergren and the corporate Defendants; (2) loans made between Sellergren and the corporate Defendants without the requisite formalities; (3) the failure of Sellergren to operate at arms length with the corporate Defendants; and (4) the commingling of assets and identities between the corporate Defendants and Sellergren.
Further, Plaintiffs have alleged that failure to pierce the corporate veil would promote injustice or perpetuate a fraud. Indeed, the Seventh Circuit has explained that "in cases involving claims to pension benefits protected by ERISA, it has been recognized that there is a federal interest supporting disregard of the corporate form to impose liability." Lumpkin v. Envirodyne Indus., Inc., 933 F.2d 449, 460 (7th Cir. 1991). Thus, Plaintiffs' allegations are sufficient to survive a motion to dismiss.
II. Motion to Dismiss RICO Counts
Sellergren moves the Court to dismiss Counts III, IV, and V, which allege RICO claims pursuant to 18 U.S.C. § 1962(a)-(c) and predicate acts of mail fraud, for lack of subject matter jurisdiction. Fed. R. Civ. P. 12(b)(1). Namely, Sellergren contends that the RICO claims are preempted by § 8 of the National Labor Relations Act ("NLRA") and § 301 of the Labor Management Relations Act ("LMRA"). 29 U.S.C. §§ 185 & 158.
In support, Defendant cites Talbot v. Robert Matthews Distrib. Co., 961 F.2d 654, 662 (7th Cir. 1992), where the Seventh Circuit held that the NLRA preempted a RICO claim because "the underlying conduct of the plaintiffs' RICO claim is wrongful only by virtue of the labor laws. " The Talbot Defendants allegedly used the U.S. mail in furtherance of three frauds: (1) the fraudulent transfer of plaintiffs' employment; (2) the fraudulent termination of plaintiffs' employment; and (3) the Union's failure to fairly represent them in arbitration. Id. In finding that the NLRA preempted a RICO claim based on this activity, the Seventh Circuit distinguished the Third Circuit's holding in United States v. Boffa, 688 F.2d 919, 930-33 (3d Cir. 1982), cert. denied, 460 U.S. 1022, 75 L. Ed. 2d 494, 103 S. Ct. 1272 (1983) that the NLRA does not preempt RICO claims based on activity arguably prohibited by the NLRA, namely, alleged use of the U.S. mail in furtherance of a scheme to defraud employees of economic benefits created in a collective bargaining agreement. Talbot, 961 F.2d at 662. Significantly, the Third Circuit also held that activity analogous to that alleged in Talbot could not support a mail fraud claim because it was under the exclusive jurisdiction of the NLRB, namely, a "labor switch" that caused the employees to be fired and not rehired by the second company and was effectuated by influencing their union representative so that they were not fairly represented. Boffa, 688 F.2d at 923, 926-30. Because the alleged fraudulent activity in the instant case is analogous to the activity that the Third Circuit found cognizable in a RICO claim based on mail fraud and distinguishable from the activity that both the Third and Seventh Circuits found under the exclusive jurisdiction of the NLRA when alleged in support of a RICO claim, this Court finds that the NLRA does not preempt Plaintiffs' RICO claims. Cf. Breininger v. Sheet Metal Workers Int'l Assoc., 493 U.S. 67, 110 S. Ct. 424, 107 L. Ed. 2d 388 (1989) (district court had jurisdiction to hear fair representation claim although union's breach of duty of fair representation might violate § 8(b) of the NLRA) and International Bhd. of Boilermakers v. Hardeman, 401 U.S. 233, 237-39, 91 S. Ct. 609, 612-14, 28 L. Ed. 2d 10 (1971) (district court had jurisdiction to hear claim that unlawful expulsion from the union violated § 101(a)(5) of Labor-Management Reporting and Disclosure Act, 29 U.S.C. § 411(a)(5)).
Neither the United States Supreme Court nor the Seventh Circuit has decided whether § 301 of the LMRA may preempt a RICO claim. However, both Courts have extensively addressed preemption of state claims by § 301. Section 301 preemption is "related to but distinct from" NLRA preemption, which derives from the primary jurisdiction of the NLRB; the preemptive effect of § 301, in contrast, is based upon the necessary federal protection of a uniform body of federal labor law. Allis-Chalmers Corp. v. Lueck, 471 U.S. 202, 212 n.6, 105 S. Ct. 1904, 85 L. Ed. 2d 206 (1985). In contrast to the NLRA, Section 301 grants federal courts jurisdiction over such claims. Section 301 preempts state claims, "lest common terms in bargaining agreements be given different and potentially inconsistent interpretations in different jurisdictions." Livadas v. Bradshaw, 129 L. Ed. 2d 93, 114 S. Ct. 2068, 2077 (1994). It is well-established that § 301 preempts "state laws purporting to determine 'questions relating to what the parties to a labor agreement agreed, and what legal consequences were intended to flow from breaches of that agreement.'" 114 S. Ct. at 2078 (quoting Lueck, 471 U.S. at 211). Thus, the Supreme Court has "stressed that it is the legal character of a claim, as 'independent' of rights under the collective bargaining agreement, that decides whether the state cause of action may go forward." Id. Further, "when the meaning of contract terms is not the subject of dispute, the bare fact that a collective-bargaining agreement will be consulted in the course of state-law litigation plainly does not require the claim to be extinguished." Id.
Defendant relies upon Underwood v. Venango River Corp., 995 F.2d 677 (7th Cir. 1993), overruled on other grounds by Hawaiian Airlines, Inc. v. Norris, 129 L. Ed. 2d 203, 114 S. Ct. 2239 (1994), where the Seventh Circuit held that the Railway Labor Act ("RLA") preempts a RICO claim. Although the Seventh Circuit has not addressed whether § 301 of the LMRA preempts RICO claims, the Seventh Circuit's reasoning in Underwood applies equally well to the instant matter. Accordingly, the Court feels compelled to hold that § 301 preempts Plaintiffs' RICO claims. In Underwood, the Seventh Circuit noted that cases regarding the preemptive effect of § 301 are "helpful" and "valuable . . . by way of analogy to RLA cases." 995 F.2d at 681 & 682 n.2. As the Seventh Circuit discussed, the Supreme Court has repeatedly declined invitations to preempt federal claims, namely: (1) the Federal Employers' Liability Act, in Atchison, Topeka & Santa Fe Ry. Co. v. Buell, 480 U.S. 557, 107 S. Ct. 1410, 94 L. Ed. 2d 563 (1987); (2) 42 U.S.C. § 1983, in McDonald v. City of West Branch, 466 U.S. 284, 104 S. Ct. 1799, 80 L. Ed. 2d 302 (1984); and (3) the Fair Labor Standards Act, in Barrentine v. Arkansas-Best Freight Sys., 450 U.S. 728, 101 S. Ct. 1437, 67 L. Ed. 2d 641 (1981). However, the Underwood Court distinguished RICO from the other federal claims on the grounds that it does not seek to vindicate an independent substantive right derived from a source other than the collective bargaining agreement. Underwood, 995 F.2d at 684-86. The Court held that this failure is evidence that Congress intended the RLA to preempt RICO claims. Id. Thus, the court found it unnecessary to determine whether adjudication of the RICO claim requires interpretation of the collective bargaining agreement. Id. Because the Seventh Circuit relied heavily on cases interpreting the preemptive effect of the LMRA, this Court finds that Underwood's reasoning applies equally well to the instant case, where the obligation at issue was created by a collective bargaining agreement. Indeed, the Supreme Court has subsequently noted the relevance of state preemption principles to preemption of another federal claim. Hawaiian, 114 S. Ct. at 2247 n.6. Moreover, the Supreme Court has explained that "the pre-emption standard that emerges from the line of cases leading to Buell -- that a state-law cause of action is not pre-empted by the RLA if it involves rights and obligations that exist independent of the collective bargaining agreement -- is virtually identical to the pre-emption standard the Court employs in cases involving § 301 of the LMRA," thus adopting the LMRA standard of pre-emption to resolve claims of RLA pre-emption. Id. at 2247 & 2249.
Having held that the Court lacks subject matter jurisdiction over the RICO claims, the Court need not determine the remaining grounds advanced by Defendant in support of his Motion to Dismiss the RICO claims.
For the given reasons, the Court DENIES Defendant Sellergren's Motion to Dismiss Count II and GRANTS Defendant Sellergren's Motion to Dismiss Counts III, IV, and V.
JOHN A. NORDBERG
United States District Judge
DATED: February 1, 1996