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Local# 1674 of Howard Mental Health v. Howardcenter, Inc.

United States District Court, D. Vermont

August 27, 2014




Plaintiff Local #1674 of Howard Mental Health ("the Union") brings this action against Defendant HowardCenter, Inc. ("HowardCenter") for its alleged failure to properly apply state Medicaid funds. The Union submits that the state appropriations included a specific directive that they were to be paid to the employees represented by the Union, and brings claims of unjust enrichment, breach of trust, and conversion under Vermont law. This action was originally filed in state court and Defendant removed, asserting that because Plaintiff is a union operating under a Collective Bargaining Agreement ("CBA") with Defendant, the state action is completely preempted and displaced by Section 301 of the Labor Management Relations Act ("LMRA"), 29 U.S.C. § 185.

Plaintiff has now moved to remand the case back to state court for lack of subject matter jurisdiction. Defendant has moved to dismiss the action in its entirety under Fed.R.Civ.P. 12(b)(6) for failure to state a claim upon which relief can be granted, again on the grounds that the state law claims are preempted by federal law. Because the Court finds that the claims are not completely preempted by the LMRA, and therefore there is no federal question creating subject matter jurisdiction, the Court grants Plaintiff's motion to remand, ECF No. 22. Because the Court has no jurisdiction over this action, Defendant's motion to dismiss, ECF No. 5, is denied as moot.


The Union is a subordinate body of AFL-CIO and the designated legal representative of all permanent and full-time employees and permanent part-time employees ("Represented Employees") of Defendant HowardCenter in the defined bargaining unit as certified by the National Labor Relations Board ("NLRB"). Defendant HowardCenter is a Vermont nonprofit corporation and health care provider located in Burlington, Vermont. HowardCenter contracts with the State of Vermont to provide Medicaid services and receives State Medicaid funds for its services as appropriated by the Vermont Legislature.

I. Collective Bargaining Agreement

The Union negotiated a CBA with HowardCenter effective July 1, 2012, through June 30, 2014. The CBA governs the terms and conditions of employment for all HowardCenter employees represented by the Union. Article V of the CBA establishes the wages, salaries, and compensation bargained for by the Union and agreed to by the parties. Section 501.B of this article provides:

a. Effective 7/01/2012 the Agency will increase each non-probationary covered employee's base in the amount of $.35 per scheduled hour;
b. Effective 7/01/2013, all non-probationary covered staff will receive a 1.6% increase to base salary.

CBA 16. Appendix B of the CBA addresses the minimum and maximum salary levels for employees. The CBA further provides that it addresses all subjects of bargaining:

The parties acknowledge that during the negotiations which resulted in this Agreement, each had unlimited right and opportunity to make demands and proposals with respect to all proper subjects of collective bargaining and that all such proper subjects have been discussed and negotiated upon and that except as otherwise provided herein, the Agreement shall not be subject to reopening unless mutually agreed.

Id. at 7. Article I, Section 106 of the CBA directs that the "rights and privileges" created by the CBA are enforceable only pursuant to the terms and conditions established by the Agreement itself, id. , and that all disputes arising over "a violation, misinterpretation, or misapplication of" its terms shall be subject to the grievance and arbitration procedures established by the CBA. Id. at 29.

II. Act 50 Appropriations

HowardCenter is reimbursed for its Medicaid services through the State Medicaid budget. The State Medicaid budget is annually appropriated by the Vermont Legislature. Vt. Stat. Ann. tit. 33, § 1901a. In May 2013, the Legislature passed Act 50, the appropriations act for fiscal year 2014. Section E.307.2 of Act 50, "Reduction in Medicaid Cost-Shift, " provides that "[b]eginning on November 1, 2013, the Agency of Human Services shall increase Medicaid reimbursements to participating providers for services provided by an amount equal to three percent of fiscal year 2012 expenditures for those services." E.307.2(a). The Act further provides that "[r]evenue generated from the Medicaid rate increase in this act shall be used by designated agencies and specialized service agencies to provide a commensurate increase in compensation for direct care workers." E.314.5. Act 50 requires that each designated and specialized service agency report to the Agency of Human Services how it has complied with this provision. Id .[2]

HowardCenter is entitled to and has accepted the additional three percent in funds appropriated under Act 50. Compl. ¶¶ 7, 16. However, according to Plaintiff, it has not provided a commensurate increase in compensation to its direct care workers. A substantial portion of the Union's Represented Employees are direct service providers to Medicaid recipients ("Qualified Represented Employees"). The crux of the Union's Complaint is that HowardCenter is required to use the additional funds under Act 50 to increase the compensation for the Qualified Represented Employees, and that it has not met these requirements despite accepting the increase in reimbursements.

The Union filed an action in the Chittenden Superior Court on March 7, 2014, bringing claims of unjust enrichment, breach of trust, and conversion under state law. Compl. ¶¶ 28-29, 33-39. As relief, the Union seeks an accounting of the funds received as a result of Act 50, declaratory judgment finding that HowardCenter is required to pay an additional three percent to direct service providers, and an injunction requiring HowardCenter to pay the increase in reimbursements directly to the direct service providers. ...

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