ENGO COMPANY v. NEW JERSEY CARPENTERS FUNDS et al

Filing 20

OPINION. Signed by Judge Jose L. Linares on 1/21/14. (gmd, )

NOT FOR PUBLICATION

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

ENGO COMPANY,

Civil Action No. 13-5252 (JLL)

Plaintiff,
OPINION
V.

;NEW JERSEY CARPENTERS FUI’JD &
NORTHEAST REGIONAL COUNCIL OF
CARPENTERS,
Defendants.
LINARES, District Judge.
This matter comes before the Court by way of Defendants New Jersey Carpenter Funds
(the “Funds”) and Northeast Regional Council of Carpenters (the “Union”) (collec
tively
“Defendants”)’s motion to dismiss Plaintiff Engo Company (“Plaintiff’ or “Engo”)’s compl
aint
pursuant to Federal Rule of Civil Procedure I 2(b)(6).’

The Court has considered the

submissions made in support of, and in opposition to, Defendants’ motion and decide
s this
matter without oral argument pursuant to Federal Rule of Civil Procedure 78. For the reason
s set
forth below, Defendants’ motion is granted.

Engo’s complaint is dismissed in its entirety

without prejudice to Engo’s right to seek relief from this Court when and if
it ultimately
establishes federal subject matter jurisdiction.

Although Defendants bring their motion pursuant to Federal Rule of Civil Procedure 12(b)(6),
the Court will
construe Defendants’ motion as one to dismiss for lack of ripeness and for lack of subject
matter jurisdiction
pursuant to Federal Rule of Civil Procedure 12(b)(l).

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I.

2
BACKGROUND
This action stems from Engo’s allegations that, pursuant to a Collective Bargaining

Agreement (“CBA”) between it and the Union, it is not obligated to make contributions to
employee welfare and pension funds on behalf of certain of its employees.
A.

The Parties

Engo is a New Jersey Company which manufactures display cases and shelves. (See
Compl. at

¶ 6.) The Funds are multi-employer pension and welfare trust funds. (See id. at ¶ 7.)

The Union represented Engo’s employees in negotiating the terms of various Collective
Bargaining Agreements (“CBAs”) into which Engo and the Union entered, which required Engo
to make contributions to the Funds on behalf of union employees. (See id. at 9-10.)
¶J
B.

The Parties’ Obligations under the CBA

Engo and the Union signed the most recent and final Collective Bargaining Agreement
(the “CBA”) on June 12, 2007. (CBA at 11.) That CBA was effective from June 1, 2007
through May 31, 2010. (CBA at

¶ 1-1.) The CBA required Engo to “pay monthly to the New

Jersey Carpenters Welfare [and] Pension Fund[s]
worked..

.“

.

.

.

for each Union employee, for all hours

(CBAatJ5-l;6-l.)

The dispute resolution provision of the CBA provides that:
[a]I1 disputes or complaints of whether character [sic] if not adjusted by
the subordinates involved, shall be referred to the New Jersey Regional
Council of Carpenters, Executive Secretary Treasurer (EST) or his
designee and the Employer or his direct representative for settlement.
If the parties are unable to agree on any settlement, the dispute shall be
2

The Court sets forth only those facts it deems relevant to deciding the instant motion
to dismiss. These facts are
taken from the complaint, the briefs, and the exhibits attached to submissions in support
of and in opposition to,
Defendants’ motion. As the Court construes Defendants’ motion as one challenging
the factual basis of this Court’s
subject matter jurisdiction, it is appropriate for this Court to look beyond the allegations
in the complaint in deciding
the instant motion without converting it into one for summary judgment. See, e.g.,
Cestonaro v. United States, 211
F.3d 749, 752 (3d Cir. 2000).

2

arbitrated equitably and accordingly to the alternative dispute resolution
process established in the Collective Bargaining Agreement (CBA)
between the New Jersey Regional [sic] of Carpenters and the Building
Contractors Association of New Jersey.
(CBA at Art. XIII) (emphasis added.)
The CBA between the New Jersey Regional Council of Carpenters and the Building
Contractors Association of New Jersey (hereinafter the “BCANJ Agreement”), which is
incorporated by reference in Article XIII of the CBA, sets forth two separate alternative dispute
resolution mechanisms at Article XVIII and Article XXVI. The relevant text of Articles XVIII
and XXVI, respectively, is set forth below:
All questions or grievances involving the interpretation and application of
this [BCANJ] Agreement, other than trade jurisdictional disputes
shall
be handled under the following procedures:
.

.

.

If the parties are unable to affect an amicable settlement or adjustment
of any grievance or controversy, such grievance or controversy shall be
submitted to binding arbitration under the Expedited Rules of the
American Arbitration Association at the request of either party providing
notice in writing of the intent to do so is given through the other party and
the American Arbitration Association
One of the following three
Arbitrators (J.J. Pierson, Wellington Davis or Steven M. Wolf) shall be
selected who [sic] shall hear the matter and his decision will be final and
binding on the contract to the Union and all Employers.
•

.

.

.

.

•

(BCANJ Agreement Art. XVIII.)
[T]he Trustees of any Fringe Benefit Fund or an alleged delinquent
employer may request arbitration of any alleged wage or fringe benefit
fund delinquencies and arbitration must be heard within thirty (30) days
after such request. The decision of the arbitrator shall be final and
binding. The arbitration shall be heard in offices of the applicable
Carpenter Funds or in the office of the counsel for the Funds and shall be
in accordance with the rules of the New Jersey State Board of Mediation.
In order to expedite such hearing, a Permanent Arbitrator is herewith
designated and approved. Said Permanent Arbitrator is J.J. Pierson. The
Permanent Arbitrator shall serve for a period of one year and shall be
subsequently reappointed yearly thereafter upon affirmative vote of the
Fund Trustees.

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(BCANJ Agreement at Art. XXVI, ¶ 4.)
C.

The Parties’ Substantive Dispute
a.

Audit of Engo’s Books and Records

In 2011, the Trustees of the Funds engaged an auditor to examine Engo’s books
and records for the period of 2008 to 2010. (See Engo. Cert. at

¶

11.) After completing

the audit, the Funds’ auditor reported a deficiency of $504,303.63. (See Parsons Ex. E.)
Engo alleges that this alleged deficiency arises from its failure to make contributions on
behalf of those employees who had not yet been accepted into the Union and its failure to
pay its employees the “commercial rate” for time spent in travel status. (Compl. at
¶J 1415.) According to Engo, it has no obligation under the CBA either to make contributions
to the Funds on behalf of non-union employees or “to contribute to the Funds based on
the ‘commercial rate’ of travel time.” (See, e.g., Compl. at 2.)
¶
b.

The Arbitration

Over Engo’s objections, the Funds requested to arbitrate Engo’s audit
delinquency before Arbitrator J.J. Pierson pursuant to Article XIII of the CBA and
Article XXVI of the BCANJ Agreement. (See id. at

16.) Engo, however, refused to

¶

submit to arbitration before Arbitrator Pierson, and instead filed for arbitration before
Arbitrator Wellington Davis pursuant to Article XIII of the CBA and Article XVII of the
BCANJ Agreement.

(See Parsons Ex. F; see also Compi. at

¶

17.)

In filing for

arbitration before Arbitrator Davis, Engo “sought a declaration that, based on the
language of the

.

.

.

[CBAJ

.

.

.

and past practice

.

.

.

[Engo] was not obligated to

contribute to the Funds as claimed by the auditor and Fund’ counsel.” (Def. Oppn. Br. at
8.)

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The Funds declined to arbitrate before Arbitrator Davis who, at the Funds’
request, ultimately declined jurisdiction in deference to Arbitrator Pierson. (See Compi.
at

¶ 18; Def Br. at 7.) Arbitrator Pierson then rescheduled a hearing for December 29,

2011. (Nelligan Cert., Ex. D.) Subsequently, on or about December 21, 2011, Engo
requested that Arbitrator Pierson postpone the scheduled hearing to permit Arbitrator
Davis to resolve the contract dispute between Engo and the Union.

(Id.) Arbitrator

Pierson allegedly did not respond to Engo’s request. (Def. Oppn. Br. at 8.)
On December 23, 2011, Engo sent a letter to Arbitrator Pierson requesting that he
recuse himself, citing various alleged conflicts of interest. (Nelligan Cert., Ex. E.) This
request was denied. (Def. Oppn. Br. at 8.) On or about December 27, 2011, Engo filed
an action in New Jersey Superior Court seeking to disqualify Arbitrator Pierson. (Def.
Oppn.at 8; see also Civ. No. 11-7544, CM/ECF No. 1.) A day later, the Funds and the
Union removed Engo’s action to federal court; the matter was assigned to the Honorable
William J. Martini. (Civ. No. 11-7544, CM/ECF No. 1.)
In the meantime, Arbitrator Pierson proceeded with the scheduled hearing on
December 29, 2011. (See, e.g., Def. Oppn. Br. at 8.) By letter dated December 29, 2011,
Engo advised Arbitrator Pierson that it would not attend the hearing. (See Nelligan Cert.,
Ex. F.) As Engo was not represented at the hearing, Arbitrator Pierson refused to allow
the court reporter sent at Engo’s request to transcribe the proceeding. (Parsons Cert., Ex.
G.)
c.

The Arbitration Award

On January 23, 2012, Arbitrator Pierson issued a sixteen-page Award in which he
concluded that Engo had an obligation to pay a total of $792,599.66, which included the
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amount of the alleged delinquency found in the audit in addition to interest, liquidated
damages, attorneys’ fees, and arbitrator’s fees. (See Parsons Cert., Ex. G.).
d.

Vacatur of the Award

On February 27, 2012, Engo filed an action in New Jersey Superior Court requesting that
the court both vacate Arbitrator Pierson’s Award and enter an order disqualifying Arbitrator
Pierson for alleged bias. (Parsons Cert. at

¶ 20.) On May 23, 2012, Assignment Judge Travis

Francis vacated Arbitrator Pierson’s Award upon determining that Arbitrator Pierson should
have adjourned the hearing while Engo’s action seeking to disqualify him was pending in federal
3
court. (See generally Nelligan Cert., Ex. G.) Judge Francis, however, refused to disqualify
Arbitrator Pierson as an arbitrator in future matters. (Id.)
e.

Resubmission of the Fund’s Claim

By letter dated May 30, 2012, the Funds once again noticed Engo for arbitration before
Arbitrator Pierson. (Parson Cert. at

¶ 21.) Engo subsequently sent a letter to Arbitrator Pierson

requesting that he recuse himself, a request which was denied. (See id.) Accordingly, on June
21, 2012, Engo filed an application to disqualify Arbitrator Pierson in New Jersey Superior
Court. (Id. at ¶ 22.) Judge Francis denied Engo’s application on August 24, 2012. (Parson Cert.
atJ23.)
Engo then appealed Judge Francis’s decision of August 24, 2012 to the Appellate
Division, where the matter is still pending. (See, e.g., Def. Oppn. Br. at 11.) At Engo’s request,
Judge Francis stayed his order denying Engo’s application to disqualify Arbitrator Pierson on
October 17, 2012. (See, e.g., Def. Oppn. Br. at 11.)

Approximately one month after Arbitrator Pierson entered the Award against Engo, Judge Martini
entered a
consent order remanding the federal court matter to the New Jersey Superior Court. (Civ. No. 11-7544,
CM/ECF
No. 13.)

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D.

The Second Audit

The Funds are in the process of conducting another audit of Engo’s books and records for
the period of January 1, 2011 through July 9, 2012. (Compl. at

¶ 20.) That audit has not yet

been completed. (Def. Oppn. Br. at 11.)
E.

Engo’s Complaint before this Court

On August 30, 2013, Engo filed a three-count complaint in this Court seeking declaratory
judgment that: (1) Engo is not obligated to contribute to the Funds on behalf of non-union
employees (Count 1); (2) Engo is not obligated to contribute to the Funds based on the
commercial rate for time employees spent in travel (Count II); and (3) the Funds and the Union
are equitably estopped from asserting claims for contributions on behalf of non-union employees
and for travel time paid at the commercial rate. Engo invokes this Court’s jurisdiction pursuant
to the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C.
Labor Management Relations Act (“LMRA”), 29 U.S.C.

§ 185.

§ 1001,

et seq. and the

(See Compl. at ¶J 1-5.)

Defendants moved to dismiss Engo’s complaint on October 21, 2013. After Engo and
Defendants submitted their opposition and reply papers, respectively, the Court entered an order
requiring the parties to file supplemental briefs addressing whether this Court should abstain
from adjudicating Engo’s declaratory judgment action pursuant to any federal abstention
doctrine.

Defendants’ supplemental brief was filed on December 27, 2013, and Engo’s on

January 7, 2014.
II.

LEGAL STANDARD

Federal courts are courts of limited jurisdiction, and thus may adjudicate cases and
“Engo also invokes this Court’s jurisdiction pursuant to the Declaratory Judgment Act, 28 U.S.C.
§ 2201. It bears
mentioning, however, that the Declaratory Judgment Act is not an independent basis of federal
subject matter
jurisdiction. See Mack Trucks, Inc. v. Int’l Union, UAAIW, 856 F.2d 579, 583 n.4 (“Although
[the Declaratory
Judgment Act] enlarges the range of remedies available in federal courts, it does not create subject matter
jurisdiction.”).

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controversies only as permitted under Article III of the Constitution. U.S. Const. art. III,

§ 2.

Irrespective of whether a motion is filed, courts have a “continuing obligation to sua sponte raise
the issue of subject matter jurisdiction if it is in question.” Bracken v. Matgouranis, 296 F.3d
160, 162 (3d Cir. 2002). To survive a motion to dismiss for lack of subject matter jurisdiction,
the party invoking federal jurisdiction bears the burden of proving that subject matter
jurisdiction, in fact, exists. See, e.g., Mortensen v. First Federal Savings & Loan Ass ‘n., 549

F.2d 884, 891 (3d Cir. 1977) (“[T]he plaintiff [invoking federal jurisdiction] will have the burden
of proof that jurisdiction does in fact exist.”).
A motion to dismiss for lack of subject matter jurisdiction may either “attack the
complaint on its face” or “attack the existence of subject matter jurisdiction in fact, quite apart
from any pleadings.” Id. When evaluating the merits of a facial attack, “the court must consider
the allegations of the complaint as true.” Id. By contrast, on a factual attack, courts “are not
confined to the allegations in the complaint

.

.

.

and can look beyond the pleadings to decide

factual matters relating to jurisdiction.” Cestonaro, 211 F.3d at 752 (3d Cir. 2000).
Pursuant to Federal Rule of Civil Procedure 12(h)(3), a court must dismiss a complaint if
it “determines.
III.

.

.

that it lacks subject matter jurisdiction.”

DISCUSSION

It is apparent to the Court that Engo’s complaint must be dismissed because the Court
lacks subject matter jurisdiction over Engo’s claims, as these claims are committed to arbitration
pursuant to Article XIII of the CBA.
Under the Federal Arbitration Act,
[a] written provision in.. a contract evidencing a transaction involving
commerce to settle by arbitration a controversy thereafter arising out of such
contract or transaction, or the refusal to perform the whole or any part thereof, or
an agreement in writing to submit to arbitration an existing controversy arising
.

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out of such a contract, transaction or refusal, shall be valid, irrevocable, and
enforceable, save upon such grounds as exist for the revocation of any contract.
9 U.S.C.

§ 2.

Accordingly, “if [a] collective bargaining agreement provide[s] for resolution of [a]
dispute through arbitration, the court ha[s] no Jurisdiction to address the merits.” Shaffer v.
Mitchell Transport, Inc., 635 F.2c1 261, 264 (3d

cir. 1980) (citations omitted) (emphasis added).

Simply put, “the inclusion of a broad arbitration clause in a collective bargaining agreement
gives rise to a presumption of arbitrability which may be rebutted only ‘by the most forceful
evidence of a purpose to exclude the claim from arbitration.” Rite Aid of Pennsylvania, Inc. v.
UFCW Local 1776, 595 F.3d 128, 131 (3d Cir. 2010) (quoting AT&T Techs., Inc. v. Comm’s

Workers ofAm., 475 U.S. 643, 650 (1986)).
In this case, there is no dispute that Engo’s claims fall within the scope of the CBA’s
alternative dispute resolution provision.

In fact, Engo tacitly concedes this point by

acknowledging that it pursued its contractual remedies by “fil[ing] for arbitration with
Wellington Davis, seeking the same relie [that

...

[it] now seeks in this Court.” (Def. Oppn. Br.

at 13) (emphasis added). Nevertheless, Engo urges this Court to allow its claims to proceed on
their merits notwithstanding the alternative dispute resolution provision in the CBA.
Specifically, Engo asserts that “[a]rbitration by J.J. Pierson did not and will not resolve the issues
presented to this Court by.

.

.

[Engo’s] complaint” because Arbitrator Pierson is not qualified to

serve as an arbitrator. (See Def. Oppn. Br. at 14.)
In opposing Defendants’ motion to dismiss, Engo goes to great lengths to persuade this
Court that Arbitrator Pierson “demonstrated a manifest disregard for the contract and for
his
obligations as an arbitrator,” and that his Award of January 23, 2012 was wrong as a matter
of
law.

(See Def. Oppn. Br. at 15-22.) The issue before this Court is not, however, whether
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Arbitrator Pierson is qualified to serve as an arbitrator; that issue is pending before the Appellate
Division. Nor is it this Court’s task to sit in judgment of Arbitrator Pierson’s Award of January
23, 2012; Judge Francis already performed that task, and ruled in Engo’s favor in vacating the
Award.
Without specifically addressing why this case should proceed on its merits, Engo argues
that “even if Pierson were otherwise qualified to serve, he would have no jurisdiction over
[Engo].” (Def. Oppn. Br. at 23.) This argument misses the mark. At issue is whether Engo’s
claims are committed to arbitration, not which specific arbitrator has jurisdiction to resolve these
claims.
With Judge Francis’s vacatur of Arbitrator Pierson’s Award, the posture of this case is—
in practical terms—as if the arbitration before Arbitrator Pierson had never occurred. For this
Court to exercise jurisdiction over Engo’s claims before said claims are arbitrated would
undermine the alternative dispute resolution process to which the parties agreed, and the “strong
federal policy favoring” arbitration. See Pritzker v. Merrill Lynch, Pierce, Fenner & Smith,
7

F.3d 1110, 1115 (3d Cir. 1993). As Engo’s claims are committed to arbitration pursuant to the
CBA, this Court will dismiss Engo’s complaint in its entirety for lack of subject matter
jurisdiction.
IV.

CONCLUSION

For the foregoing reasons, Defendants’ motion is granted. Engo’s complaint is dismissed
in its entirety without prejudice to Engo’s right to seek appropriate relief from this Court
at such
time as it can set forth an adequate basis of federal subject matter jurisdiction.

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Dated:

2L of January, 2014.

L. LINARES
DISTRICT JUDGE

11