HAMILTON PARK HEALTH CARE CENTER, LTD. v. 1199 SEIU UNITED HEALTHCARE WORKERS EAST
Filing
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MEMORANDUM OPINION fld. Signed by Magistrate Judge James B. Clark on 11/13/13. (sr, )
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
HAMILTON PARK HEALTH CARE
CENTER, LTD.,
Plaintiff,
v.
1199 SEIU UNITED HEALTHCARE
WORKERS EAST,
Defendant.
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Civil Action No. 13-0621 (DMC)
MEMORANDUM OPINION
CLARK, Magistrate Judge
This matter comes before the Court upon Plaintiff Hamilton Park Health Care Center,
Ltd.’s (“Plaintiff”) motions for leave to amend the complaint [Docket Entry No. 29] and for
discovery [Docket Entry No. 17]. Defendant 1199 SEIU United Healthcare Workers East
(“Defendant”) has opposed both motions. [Docket Entry No. 33, 19]. The Court has fully
reviewed and considered all arguments made in support of, and in opposition to, Plaintiff’s
motions. The Court considers Plaintiff’s motions without oral argument pursuant to L.CIV.R.
78.1(b). For the reasons set forth more fully below, Plaintiff’s motion to amend is DENIED and
Plaintiff’s motion for discovery is DENIED.
I.
Background and Procedural History
This case arises out of an interest arbitration proceeding between Defendant, a union, and
several nursing homes (the “Tuchman Homes”), of which Plaintiff is one. (Compl. at ¶¶3, 6-7;
Docket Entry No. 1). The arbitration was conducted by one Martin Scheinman (“Arbitrator
Scheinman”) and the arbitration Award (“Award”) was issued on November 7, 2012. (Id. at ¶3).
Plaintiff has brought the instant action seeking to vacate the Award on the ground that Arbitrator
Scheinman exceeded his authority under the parties’ collective bargaining agreement (“CBA”).
(Id. at ¶¶23-28). Defendant has filed a counterclaim seeking to confirm the arbitration agreement.
[Docket Entry No. 9].
On July 10, 2013, Plaintiff moved this Court for leave to conduct discovery. [Docket Entry
No. 17]. In its motion, Plaintiff seeks discovery concerning three alleged factual disputes: 1)
whether Arbitrator Scheinman exceeded the scope of his authority under the CBA; 2) whether the
arbitration was conducted fairly; and 3) whether Arbitrator Scheinman exhibited bias in favor of
Defendant. (Plaintiff’s Brief in Support of Discovery at 1; Docket Entry No. 17-1). Defendant
opposed on several grounds, including that Plaintiff failed to plead as grounds for relief either an
unfair hearing or bias in the first instance. (Defendant’s Brief in Opposition to Discovery at 2;
Docket Entry No. 19). As such, and as originally noted in Plaintiff’s moving brief,1 Plaintiff filed
the instant motion to amend, seeking to add the aforementioned additional grounds in support of
vacating the arbitration Award. Because the Court finds that discovery in this matter is premised
upon what is alleged in the complaint, the Court shall first address Plaintiff’s motion to amend.
II.
Motion to Amend
a. Legal Standard
Pursuant to Fed.R.Civ.P.15(a)(2), leave to amend the pleadings is generally granted freely.
See Foman v. Davis, 371 U.S. 178, 182 (1962); Alvin v. Suzuki, 227 F.3d 107, 121 (3d Cir. 2000).
Nevertheless, the Court may deny a motion to amend where there is “undue delay, bad faith or
dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments
previously allowed, undue prejudice to the opposing party by virtue of allowance of the
1
See Plaintiff’s Brief in Support of Discovery at 1 n. 2.
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amendment, [or] futility of the amendment.” Id. However, where there is an absence of undue
delay, bad faith, prejudice or futility, a motion for leave to amend a pleading should be liberally
granted. Long v. Wilson, 393 F.3d 390, 400 (3d Cir. 2004).
An amendment is futile if it “is frivolous or advances a claim or defense that is legally
insufficient on its face.” Harrison Beverage Co. v. Dribeck Imp., Inc., 133 F.R.D. 463, 468
(D.N.J. 1990) (internal quotation marks and citations omitted). To evaluate futility the District
Court uses “the same standard of legal sufficiency” as applied for a motion to dismiss under Rule
12(b)(6). Shane v. Fauver, 213 F.3d 113, 115 (3d Cir. 2000). “Accordingly, if a claim is
vulnerable to dismissal under Rule 12(b)(6), but the plaintiff moves to amend, leave to amend
generally must be granted unless the amendment would not cure the deficiency.” Id.
In evaluating a motion to dismiss, the Court must accept the facts pled as true. Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009). This constraint, however, does not apply to legal conclusions.
Id. “[O]nly a complaint that states a plausible claim for relief survives a motion to dismiss.” Id. at
679, citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556 (2007). To be plausible, the
allegations made in the complaint must amount to “more than a sheer possibility that a defendant
has acted unlawfully.” (Id. at 678). In its review, the Court “must consider only the complaint,
exhibits attached to the complaint, matters of public record, as well as undisputedly authentic
documents if the complainant's claims are based upon these documents.” Mayer v. Belichick, 605
F.3d 223, 230 (3d. Cir. 2010).
The Federal Arbitration Act provides that an arbitration award may be vacated on the
following grounds: (1) where the award was procured by corruption, fraud, or undue means; (2)
where there was evident partiality or corruption in the arbitrators, or either of them; (3) where the
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arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause
shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other
misbehavior by which the rights of any party have been prejudiced; or (4) where the arbitrators
exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award
upon the subject matter submitted was not made. 9 U.S.C. §10(a).
b. Arguments
Plaintiff seeks to add the additional grounds of unfair hearing and arbitrator bias to its
allegations in support of vacating the Award. With respect to its claim of an unfair hearing,
Plaintiff points to the fact that Arbitrator Scheinman conducted ex parte meetings with the parties
and alleges that Plaintiff was “denied the opportunity to object to the introduction of evidence or
cross-examine any witnesses introduced.” (See Proposed Amended Complaint at ¶34; Docket
Entry No. 29-2). Moreover, Plaintiff alleges that “[t]he Award lacks any references to evidence
typically submitted in interest arbitration proceedings” and concludes that this is evidence “that
Arbitrator Scheinman had pre-determined the award – all in favor of [Defendant].” (Id. at ¶35).
As to arbitrator bias, Plaintiff cites to Defendant’s 2012 Form LM-2 Labor Organization
Annual Report (the “2012 LM-2”) which was filed with the United States Department of Labor.
(Id. at ¶36).
Plaintiff claims that Defendants 2012 LM-2 reveals that Arbitrator Scheinman
received $874,636.00 in 2012 alone, which “represents 73.5% of [Defendant’s] expenditures for
arbitration services” for that year. (Id. at ¶¶37-38) (emphasis omitted). Additionally, Plaintiff
questions not only the amount of payments made to Arbitrator Scheinman, but the timing as well,
arguing that a single payment of $26,205.00 on December 27, 2012 is “[p]articularly curious” in
light of prior payments during the month totaling $30,222.00. (Id. at ¶39).
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Plaintiff argues that Defendant will not suffer any prejudice by virtue of the amended
complaint, as “this case has not…proceeded beyond the pleading stage” and the amended
complaint “does nothing more than further elucidate [Plaintiff’s] allegations regarding the
unfairness of the proceedings and Arbitrator Scheinman’s evident partiality in favor of
[Defendant].” (Pltf. Br. Supp. of Amendment at 4). Plaintiff further contends that Defendant was
on notice of Plaintiff’s intention to seek vacatur of the arbitration on the grounds of inappropriate
conduct by pointing to a letter that was filed in a collateral action. (Id.)
Defendant contends that “the original complaint contains no allegations of arbitrator bias
or partiality.” (Deft. Br. Opp. to Amendment at 1). Defendant further argues that any such
amendment would be futile. (Id. at 2). First, Defendant contends that Plaintiff has failed to state a
claim for arbitrator bias. In support, Defendant notes that its previous LM-2 reports from 2010
and 2011 were available to Plaintiff as public records and “showed that [Defendant] paid
Arbitrator Scheinman in excess of $900,000 in each of these years, more than [Defendant] paid to
him in 2012.” (Id. at 2, n.3). Defendant points out that this information was available to Plaintiff
prior to the Complaint being filed. Further, Defendant argues that the 2012 LM-2 “demonstrates
only that Arbitrator Scheinman is in high demand, and is highly compensated, by unions and
employers alike.” (Id. at 4). Indeed, Defendant notes that arbitrators are paid equally by unions
and employers for each individual arbitration. (Id.) Lastly, as to the December 2012 payments,
Defendant argues that “[Plaintiff’s] curiosity suggests nothing more than the ‘mere possibility’ of
misconduct and is therefore insufficient to support its motion to amend the complaint.” (Id.)
Defendant further notes that the payments made in December 2012 amount to less than
one-twelfth of the payments made to Arbitrator Scheinman in 2012. (Id. at 4-5). As such,
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Defendant submits that Plaintiff’s claim for vacatur of the arbitration Award on the basis of
arbitrator bias fails to state a claim upon which relief can be granted.
Second, as to Plaintiff’s allegation that the hearing was unfair, Defendant argues that
Plaintiff failed to raise an objection to the ex parte meetings prior to the Award being issued and
thus, waived any right to challenge it now. (Id. at 6). Further, Defendant submits that “there is
nothing inherently unethical about an arbitrator meeting ex parte with parties to an arbitration.”
(Id.) Lastly, as to Plaintiff’s argument that the Award lacked reference to evidence, Defendant
maintains that “[i]t is well-established that an arbitrator need not explain the reasons for its
decision.” (Id. at 7, citing O.R. Securities, Inc. v. Professional Planning Assocs., Inc., 857 F.2d
742, 747 (11th Cir. 1988)) (internal citation omitted). In this regard, Defendant urges this Court to
deny Plaintiff’s motion on the grounds of futility.
c. Analysis
First, the Court finds that Plaintiff’s claim of arbitrator bias fails. Under subsection (2) of
9 U.S.C. §10(a), an arbitration may be vacated where “evident partiality” is shown. The Third
Circuit has held that “[a]n arbitrator is evidently partial only if a reasonable person would have to
conclude that she was partial to one side.” Freeman v. Pittsburgh Glass Works, LLC, 709 F.3d 240
(3d. Cir. 2013) (emphasis added). Plaintiff has only given the Court the amount of money
Arbitrator Scheinman was paid by Defendant for one year, and the percentage of Defendant’s
arbitration fees that were attributable to Arbitrator Scheinman. Plaintiff has not provided
Arbitrator Scheinman’s complete salary as compared to other arbitrators, or what percentage of
Arbitrator Scheinman’s salary was derived from Defendant. Without more, there is simply no
context from which the Court could find that Plaintiff’s claim is plausible on its face.2 Even when
2
The Court also notes that Plaintiff may argue that it needs the discovery sought through its prior motion to properly
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viewed in the light most favorable to Plaintiff, a reasonable person would not have to conclude that
Arbitrator Scheinman was partial to Defendant. Likewise, the Court finds nothing particularly
curious about the December 2012 payments made to Arbitrator Scheinman. As Defendant
correctly notes, the total payments received during that month were actually less than proportional
to the payments received throughout the rest of the year. Accordingly, the Court finds that
Plaintiff’s request to add bias as a ground for vacatur must be denied.
Additionally, the Court finds that Plaintiff’s claim that the hearing was unfair similarly
fails to state a claim. Under subsection (3) of 9 U.S.C. §10(a), an arbitration award may be
vacated where the arbitrator was “guilty of misconduct…in refusing to hear evidence pertinent and
material to the controversy[] or of any other misbehavior by which the rights of any party have
been prejudiced[.]” Plaintiff alleges that Arbitrator Scheinman conducted an ex parte hearing
wherein he “continu[ed] to take testimony and receive evidence without providing [Plaintiff] with
an opportunity to cross-examine and/or rebut such evidence.” (Prop. Am. Compl. at ¶33).
Plaintiff further alleges that it “was denied the opportunity to object” to the ex parte meeting. (Id.
at ¶34). However, Arbitrator Scheinman’s Award states that the parties agreed to hold ex parte
meetings and there is no mention of Plaintiff attempting to object to same. Indeed, Plaintiff also
conducted an ex parte meeting with Arbitrator Scheinman on April 26, 2012. (Id. at ¶18). As
such, the Court finds Plaintiff’s allegation to be without merit. See Teamsters, Chauffeurs, etc. v.
E.D. Clapp Corp., 551 F.Supp. 570, 576 (N.D.N.Y. 1982) (finding that both parties were “guilty of
having ex parte communications with the arbitrator” and dismissing an argument for misbehavior
on that ground). Lastly, Plaintiff alleges that Arbitrator Scheinman “failed to consider arbitration
briefs which would have provided the parties with an opportunity to frame the issues and provide
allege bias on behalf of Arbitrator Scheinmen. However, the Court would not be persuaded by such an argument.
Arbitrator Scheinman’s fees are a matter of public record, as are the fees of other comparable arbitrators.
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evidentiary support for their respective positions.” (Id. at ¶19). Plaintiff fails to specify these
documents or the substance included therein. Furthermore, Plaintiff does not allege that the
failure to consider such evidence had any bearing on the outcome of the award or that it prejudiced
any party. Under the statute, any evidence must be “pertinent and material to the controversy” to
state a claim for vacatur. 9 U.S.C. §10(a)(3). As such, even when viewed in the light most
favorable to Plaintiff, the Court finds that these allegations do not state a plausible claim for relief.
As such, Plaintiff’s motion to amend is DENIED.
III.
Motion for Discovery
a. Legal Standard
In post-arbitration proceedings, discovery is generally not allowed by the Courts. See O.R.
Securities, Inc. v. Professional Planning Addocs., Inc., 857 F.2d 742, 748 (11th Cir. 1998). This is
because Courts recognize that “arbitration is intended to be a relatively prompt and inexpensive
procedure.” Frere v. Orthofix, Inc., 99 Civ. 4049 (RMB)(MHD), 00 Civ. 1968 (RMB)(MHD),
2000 U.S. Dist. LEXIS 17467 at *12-13 (S.D.N.Y. Dec. 6, 2000). “[D]iscovery in a
post-arbitration judicial proceeding to confirm or vacate…is available only in limited
circumstances, where relevant and necessary to the determination of an issue raised by such an
application.” (Id. at *12). “The inquiry…is keyed to the specific issues raised by the party
challenging the award and the degree to which those issues implicate factual questions that cannot
be reliably resolved without some further disclosure.” (Id. at *15) (internal citations omitted).
However, courts have recognized that certain allegations require discovery in order to be properly
evaluated. “[R]equested discovery that is plainly relevant to colorable claims of arbitral bias or
misconduct may properly be granted.” National Hockey League Players' Ass'n v. Bettman, 1994
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U.S. Dist. LEXIS 1160 at *5 (S.D.N.Y. Feb. 4, 1994).
b. Arguments
Plaintiff argues that discovery should be permitted with respect to the three grounds it
proffers for vacatur of the arbitration award: 1) whether Arbitrator Scheinman exceeded the scope
of his authority under the CBA; 2) whether the arbitration was conducted fairly; and 3) whether
Arbitrator Scheinman exhibited bias in favor of Defendant. (Pltf. Br. Supp. Disc. at 1). Because
the Court has found that Plaintiff has failed to state a claim for either arbitrator bias or an unfair
hearing, it shall not address the concerns raised in 2) or 3).
As to the first issue, Plaintiff argues that “[t]here is a clear fact dispute as to whether
Arbitrator Scheinman had the authority to change the terms of the CBA and issue a multi-year
award…an issue that goes to the heart of whether the Award decided issues beyond those that the
parties agreed[.]” (Id. at 12). Plaintiff contends that a writing was required to change the terms of
the CBA and that no such writing was ever executed by the parties. (Id. at 5). Plaintiff further
claims that the clients “never agreed to change the terms of the CBA and expand Arbitrator
Scheinman’s jurisdiction to allow him to issue a multi-year award[.]” (Id. at 6). As such, Plaintiff
submits that discovery on this issue is relevant and necessary. (Id.)
Defendant opposes Plaintiff’s motion, arguing that no discovery is warranted. As to the
issue concerning whether the CBA was amended to allow Arbitrator Scheinman to give such an
award, Defendant submits that discovery is unnecessary because no factual dispute exists. In this
regard, Defendant “does not dispute…that a signed writing of the parties authorizing a multi-year
award does not exist.” (Deft. Br. Opp. Disc. at 8) (emphasis added). Consequently, Defendant
argues that “the issue presented is purely a legal question” and “there is no basis for obtaining
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discovery.” (Id.) Further, as to Plaintiff’s claim that the client never authorized an extension,
Defendant argues that it is only counsel’s communications to the arbitrator which are relevant.
(Id.) Therefore, Defendant submits that there is “no evidence to dispute Arbitrator Scheinman’s
finding that the parties agreed to permit him to issue a multi-year award.” (Id. at 9).
In reply, Plaintiff states that although Defendant admits that no writing exists, Defendant
“fails to provide any clarity as to the manner and method by which the parties changed the terms of
the [CBA.]” (Pltf. Br. Reply at 2; Docket Entry No. 23). In addition, Plaintiff argues that its
counsel for the Tuchman Homes, Morris Tuchman, Esq. (“Attorney Tuchman”), never consented
to a modification of the CBA. (Id. at 3).3
Defendant was granted leave to file a surreply. Defendant noted that the proposed
declaration of Attorney Tuchman was unsigned and therefore, created no possible factual dispute
as to whether Plaintiff consented to a multi-year Award. (Deft. Br. Surreply at 3; Docket Entry No.
25). Further, Defendant notes that Plaintiff has not challenged that Attorney Tuchman “was its
authorized representative in the interest arbitration.” (Id.) Therefore, Defendant requests that the
Court deny discovery.
c. Analysis
The Court finds that Plaintiff has not demonstrated that discovery is warranted with respect
to its sole ground for vacatur of the arbitration award. Discovery is rarely given in
post-arbitration proceedings and is only necessary for issues which “implicate factual questions
that cannot be reliably resolved without some further disclosure.” Frere, at *15. Whether a
3
The Court notes that the declaration of Morris Tuchman, Esq., attached to Plaintiff’s Reply is unsigned and indeed,
resulted in several additional letters being filed by the parties. On August 30, 2013 counsel for Plaintiff filed a
supplemental declaration advising that Attorney Tuchman refused to sign his own declaration. (Docket Entry No. 26).
Defendant subsequently moved to strike the supplemental declaration as “unauthorized and untimely.” (Docket Entry
No. 28). Plaintiff objected, arguing that the supplementation was “necessary and proper” and merely clarified
counsel’s efforts to get Attorney Tuchman to sign the declaration. (Docket Entry No. 31). As such, the Court shall
allow the supplemental declaration and denies Defendant’s request to strike same.
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writing is required to modify or change the terms of the parties’ CBA is a legal question and not a
factual one. Defendant has stipulated that no such writing exists and relies on the proposition that
the CBA did not require a writing in order for Arbitrator Scheinman to issue a multi-year award.
Furthermore, as to the question of whether Attorney Tuchman gave consent on behalf of Plaintiffs
to authorize Arbitrator Scheinman to issue a multi-year award, the Court finds that this issue as
currently presented does not justify post-arbitration discovery. First, the Court considers
well-taken Defendant’s observation that with respect to the issue of consent, only counsel’s
communications to the arbitrator are relevant. More importantly, Plaintiff has failed to make a
showing sufficient to justify an order compelling discovery. Plaintiff has not shown that consent
to a modification of the CBA was not given insofar as it could not produce a signed affidavit to that
effect. More troublingly, Plaintiff has openly admitted that Attorney Tuchman refused to sign
such an affidavit. Accordingly, Plaintiff’s motion for discovery on this issue is DENIED.
IV.
Conclusion
For the reasons set forth above, Plaintiff’s motion to amend is DENIED and Plaintiff’s
motion for discovery is DENIED. An appropriate Order shall accompany this Opinion.
Dated: November 13, 2013
s/ James B. Clark, III
HONORABLE JAMES B. CLARK, III
UNITED STATES MAGISTRATE JUDGE
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