In Jittian Mechanical Corporation v. United Services Workers Union

Transcription

1 /////an Mechanical Corporation v. United Services Workers Union Local 355: An Expired Collective Bargaining Agreement Still Requires Arbitration of a Payment Dispute Craig C. Martin and William L. Scogland In Jittian Mechanical Corporation v. United Services Workers Union Local 355? District Judge Arthur D. Spatt of the Eastern District of New York dismissed an employer's petition to enjoin arbitration after finding that an arbitration clause in an expired collective bargaining agreement was enforceable. A local union and others had demanded arbitration to resolve a dispute over payments due to benefit funds under the collective bargaining agreement; the employer argued that the arbitration clause was no longer enforceable after the union declared the agreement "null and void" and stopped representing the employer's workers. The court rejected the argument. The Factual Background In 2005, Mechanical Corporation (JiUiaflD entered into an agreement with the Long Island and New York Mechanical Contractors Association (Contractors Association), a trade group, to permit the Contractors Association to negotiate a collective bargaining agreement on its behalf with a local service workers' union (Local 355). 2 The Contractors Association negotiated a 2002 collective bargaining agreement with Local 355, and a successor 2008 collective bargaining agreement (2008 CBA) that included a provision requiring to contribute $0.80 per hour to a benefit fund established for 's employees (Benefit Fund). 3 The 2008 CBA, including this benefit payment obligation, was effective from July 1, 2008 through June 30, 2011, and contained an arbitration clause for disputes arising under it. Craig C. Martin, a partner in Jenner & Block LLP's Chicago office, is cochair of the firm's National Litigation Department and a long-time member of the firm's governing committee. William L. Scogland, who also is a partner in the firm's Chicago office, is chair of the firm's Employee Benefits and Executive Compensation Practice. The authors can be reached at cmartin jenner.com and wscogland@jenner.com, respectively. The authors wish to thank Michael W. Ross, an associate in the firm's Litigation Department, for his help in preparing this column. Vol. 38, No. 3, Winter Employee Relations Law Journal

2 In April 2011, a few months before the expiration of the 2008 CBA, advised Local 355 that it had terminated its relationship with the Contractors Association and indicated its intention to conduct direct negotiations with Local 355 for a successor collective bargaining agreement. These negotiations reached an impasse, however, and Local 355 subsequently informed that, effective August 1, 2011, it would no longer represent 's employees. Specifically, Local 355 wrote to to "disclaimq interest in representing your employees at Mechanical Corp." and expressly declared that the 2008 CBA "is hereby null and void and of no further effect." 4 The Benefit Fund Dispute A few months later, a dispute arose between Local 355 and over whether had fully funded the Benefit Fund under the 2008 CBA. Local 355 claimed that underpaid contributions for a period covered by that agreement. 5 Since the 2008 CBA contained an arbitration clause, Local 355 and others (including the Benefit Fund) made a demand seeking to arbitrate a claim for underpayment of benefits. then petitioned under applicable New York procedures to enjoin the arbitration, relying principally on Local 355's determination that it was no longer representing 's employees, and, in particular, Local 355's statement that the 2008 CBA was "null and void." 6 According to, if the 2008 CBA had become null and void, any arbitration agreement contained in it was also a nullity and could not be enforced. Local 355 removed the action to the Eastern District of New York. As noted, 's principal argument before the district court was that it could not be compelled to arbitrate following Local 355's declaration that the 2008 CBS was "null and void." 7 According to, there was no jurisdiction to remove the action to federal court under 29 U.S.C. Section 1132(e)(1), which provides exclusive jurisdiction to district courts for certain ERISA artions, because the 2008 CBA had been nullified by Local 355. also argued that there was no valid arbitration agreement following the nullification of the 2008 CBA, and so it could not be forced to arbitrate under the 2008 CBA's arbitration clause. The Decision The court rejected 's arguments and dismissed its petition to stay arbitration. As an initial matter, the court rejected 's jurisdictional argument under 29 U.S.C. Section 1132(e)(1). The court explained that the dispute between the parties concerned payment under the 2008 CBA during a period covered by that agreement, and so "[t]he fact that the agreement was expired when the demand was made and this suit was initiated does not affect this Court's jurisdiction." 8 To support this proposition. Judge Spatt cited Mason Tenders District Council Welfare Employee Relations Law Journal 85 Vol. 38, No. 3, Winter 2012

3 Fund v. ITRI Brick & Concrete, 9 another case in which a court faced a challenge to its jurisdiction based upon the expiration of a collective bargaining agreement that required benefit contributions. The opinion in that case reviewed the pertinent case law and explained that a suit brought for contributions "owed during the life of a collective bargaining agreement gives rise to jurisdiction under ERISA "even though the collection action was not brought until after expiration" of the agreement. 10 Following Mason Tenders, Judge Spatt rejected the jurisdictional challenge without detailed discussion. 11 The Disclaimer's Effect The court also rejected 's arguments that the 2008 CBA, including its arbitration provision, was void as a result of Local 355's disclaimer. 12 In reaching this conclusion, the court first recognized that, if the contract as a whole were determined to be void, could "challenge the enforceability of an arbitration clause without alleging a particular defect in that clause." Nevertheless, the court did not agree with that the contract was void as a result of Local 355's statement that it was. According to the court, although "makes the claim that the CBA is 'void,' it is actually contending that the CBA has simply expired. Thus, does not make any substantive allegation that the CBA is void or that there is a particular defect in the arbitration clause itself." 13 The court did not consider it to be significant that Local 355 had disclaimed its interest in representing 's employees, nor that Local 355 had itself declared the 2008 CBS null and void, as these facts did not alter the court's analysis that it was addressing an expired collective bargaining agreement. Existing Case Law Because the court concluded that it was dealing with an expired agreement, it next looked to existing case law concerning such agreements. In keeping with the Supreme Court's decision in Litton Financial Printing Division v. NLRB, H Judge Spatt held that a "post-expiration dispute remains arbitrable" only if the dispute "has its real source in the collective bargaining agreement." Quoting Litton, Judge Spatt concluded that a post-expiration dispute is arbitrable when: 1. The dispute involves facts and occurrences that arose before termination; 2. An action taken after expiration infringes a right that accrued or vested under the agreement; or 3. Under normal principles of contract interpretation, the disputed contractual right survives expiration of the agreement. 15 Rei thed paym in eff contr tion." went the cl Com Th in a over the p "null this c that may; mighi Note 1. No. 2. See 3. Id. 4. See 5. See 6. On the 20 howev 7. See 8. Id., 9. No. 10. Se 11. Se matter coverc the tin 12. Id of inte Vol. 38, No. 3, Winter Employee Relations Law Journal Emplo

4 Relying on the first triggering circumstance, the court concluded that the dispute was arbitrable because "[t]he alleged failure to remit proper payments to the employee benefit fund arose while the 2008 CBA was in effect between the parties," so that "the obligation to make benefit contributions involves facts and occurrences that arose before termination." Having found the existence of a valid arbitration clause, the court went on to determine that the dispute about underpayment fell within the clause's scope under ordinary arbitration law principles. 16 Conclusion The court to. Mechanical determined that an arbitration clause in a collective bargaining agreement required arbitration of a dispute over benefits, even though the agreement had expired and even though the party seeking benefits had expressly stated that the agreement was "null and void" and "of no further effect." Although the circumstances of this case may be unique in some respects, employers should be aware that arbitration clauses in expired or otherwise terminated agreements may still be enforced. This may be the case even if the course of dealing might indicate otherwise. Notes 1. No. 12-cv-0042-ADS-ARL, Dkt No. 17, slip op. (E.D.N. Y.June 21,2012) ( Opinion). 2. See Opinion Id. 4. See id., Dkt No See Opinion On this point Local 355 responded, inter alia, that before it made this statement, the 2008 CBA had been terminated by petitioner, see id., Dkt No. 16, at 2; it appears, however, that the document Local 355 relied upon for this proposition was a letter from noting that the 2008 CBA would expire on June 30, 2011, but did not indicate was terminating the agreement. See id. Dkt No. 12, Ex. D. 7. See id., Dkt No. U. 8. Id., Dkt No. 17, slip op No. 96 Civ. 6754, 1997 WL , at *<f n.4 (S.D.N.Y. Oct. 31, 1997). 10. See id. at *4-* See Opinion 5 ("[Nlone of those cases hold that the district court lacks subject matter jurisdiction over an ERISA action to collect contributions for the time period covered by the CBA merely because the collective bargaining agreement has expired by the time a lawsuit is instituted." (quoting Mason Tenders in a parenthetical)). 12. Id. at 9 ("'s principal argument against arbitration is that Local 355's disclaimer of interest... rendered the entire 2008 CBA null and void as a matter of law. As such, sought to stay arbitration in state court pursuant... and retains this argument on Employee Relations Law Journal 87 Vol. 38, No. 3, Winter 2012

5 Split < the ground that there is no agreement currently in place to arbitrate the instant dispute between the parties.") (internal citation omitted). 13. Id. at U.S. 190 (1991). 15. Opinion 12 (quoting Litton, 501 U.S. at ). 16. As part of its analysis, the court rejected 's argument that Local 355 did not follow the proper procedures for initiating arbitration, concluding that this was a procedural defense within the purview of the arbitrators, not the court. See id. at hostile (Title " Circuit: strate t to affe Seconc view (EEOC enable worke certior, TheS Title color, ble ec< is stric also in if it di emplo the en the ha steps t An. by a s tive d< harass of sue Vol. 38, No. 3, Winter Employee Relations Law Journal Employ