Control Network Communications, Inc. v. International Brotherhood of Electrical Workers, Local Union No. 236
Filing
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MEMORANDUM-DECISION and ORDER - That Local 236's 16 Motion to Dismiss for Failure to State a Claim is GRANTED. That CNC's amended complaint (Dkt. No. 12) is DISMISSED. That the Clerk close the case. Signed by Judge Gary L. Sharpe on 11/5/2015. (jel, )
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF NEW YORK
________________________________
CONTROL NETWORK
COMMUNICATIONS, INC.,
Plaintiff,
1:14-cv-1133
(GLS/ATB)
v.
INTERNATIONAL
BROTHERHOOD OF
ELECTRICAL WORKERS,
LOCAL UNION NO. 236,
Defendant.
________________________________
APPEARANCES:
OF COUNSEL:
FOR THE PLAINTIFF:
Hodgson, Russ Law Firm
677 Broadway
Suite 301
Albany, NY 12207
FOR THE DEFENDANT:
Sherman, Dunn Law Firm
900 Seventh Street NW
Suite 1000
Washington, DC 20001
Pozefsky, Bramley Law Firm
90 State Street
Suite 1405
Albany, NY 12207
Gary L. Sharpe
District Judge
RICHARD L. WEISZ, ESQ.
JONATHAN D. NEWMAN, ESQ.
LUCAS R. AUBREY, ESQ.
WILLIAM POZEFSKY, ESQ.
MEMORANDUM-DECISION AND ORDER
I. Introduction
Plaintiff Control Network Communications, Inc. (CNC) commenced
this action against defendant International Brotherhood of Electrical
Workers, Local Union No. 236 alleging breach of contract and fraud, and
asserting federal question jurisdiction under the Labor Management
Relations Act (LMRA). (Am. Compl., Dkt. No. 12.) Pending before the
court is Local 236’s motion to dismiss. (Dkt. No. 16.) For the foregoing
reasons, the motion is granted.
II. Background
A.
Facts
CNC is an employer-member of the National Electrical Contractors
Association and a signatory of successive multi-employer collective
bargaining agreements (CBA) with Local 236 since 2001. (Am. Compl.
¶¶ 1, 7-8, 63.) All of the CBAs contained a “most favored nations” clause
guaranteeing that signatories receive the same terms and conditions
provided in any subsequent agreement to another party. The clause in the
most recent CBA states that:
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[t]he Union agrees that if during the life of this
Agreement, it grants to any other Employer in the
electrical industry on work covered by this
Agreement, any better terms or conditions than
those set forth in this Agreement, such better terms
or conditions shall be made available to the
Employer under this Agreement and the Union shall
immediately notify the Employer of any such
concessions.
(Id. ¶ 9 (citing CBA § 2.02).)
Adirondack Cabling, Inc. is an employer of electrical workers that
also had an agreement with Local 236. (Id. ¶¶ 10, 16, 20.) Although
Adirondack Cabling was not eligible, it had a single employer agreement
with Local 236. (Id. ¶¶ 16-17.) Such agreements were reserved for
private telephone and utility companies as well as facility maintenance
crews that were directly employed by a business. (Id. ¶ 16.) Adirondack
Cabling did not qualify as any of these entities. (Id. ¶ 17.)
In 2007, CNC asked Local 236 for a copy of its agreement with
Adirondack Cabling. (Id. ¶ 73.) CNC suspected that Adirondack Cabling
received more favorable terms from Local 236, which allowed it to outbid
CNC on electrical projects. (Id.) Local 236 did not provide a copy of the
agreement, but, instead, informed CNC that the CBA had the same
contract terms as its agreement with Adirondack Cabling. (Id. ¶ 74.)
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In September 2013, CNC again requested a copy of the agreement
between Local 236 and Adirondack Cabling. (Id. ¶ 75.) This time Local
236 produced the agreement. (Id. ¶ 76.) The agreement contained terms
CNC deemed more favorable than those in its CBA. (Id. ¶ 12.) For
example, Local 236 agreed that Adirondack Cabling could provide
commercially available 401(k) retirement and health care plans, could hire
non-union summer help, could pay certain employees a lower rate than
the prevailing rate, and did not need to provide benefits to union members
for the first ninety days of employment. (Id. ¶¶ 13, 15, 30, 32.)
Additionally, Local 236 agreed to indemnify Adirondack Cabling for liability
arising from its agreement and included a no strike/no picket clause. (Id.
¶¶ 34, 36.) The multi-employer CBA that CNC signed did not include any
of these terms. (Id. ¶¶ 31, 33, 35-36.)
To resolve disputes between signatories and Local 236, the CBA
sets forth a three-step grievance procedure. (Id. ¶¶ 45-47.) First, “[a]ll
grievances or questions in dispute shall be adjusted by the duly
authorized representative of each [party].” (Id. ¶ 45 (citing CBA § 1.06).)
If the parties cannot resolve the matter within forty-eight hours, the issue
will then be referred to the Labor Management Committee (LMC). (Id.)
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The LMC decides matters by a majority vote of the quorum. (Id. ¶ 46
(citing CBA § 1.07).) A quorum is four members of the LMC, which
includes two members from each party. (Id.) LMC decisions are “final
and binding” “[i]n absence of a deadlock.” (Id.) If the LMC “fail[s] to agree
or adjust any matter,” the grievance will then be referred to the Council on
Industrial Relations for the Electrical Contracting Industry whose decision
is final and binding. (Id. ¶ 47 (citing CBA § 1.08).) Finally, the CBA
provides “[w]hen any matter in dispute has been referred to conciliation or
arbitration for adjustment, the provisions and conditions prevailing prior to
the time such matters arose shall not be changed or abrogated until
agreement has been reached or ruling has been made.” (Id. ¶ 48 (citing
CBA § 1.09).)
After receiving a copy of the Adirondack Cabling agreement, CNC
filed a grievance against Local 236 alleging violations of the most favored
nations clause. (Id. ¶ 42.) The grievance was sent to the LMC, and, on
December 19, 2013, the LMC, which included members of Local 236,
announced it was deadlocked. (Id. ¶¶ 49, 51.) In April 2014, the LMC
required the parties to attend a hearing and ultimately denied CNC’s
grievance. (Id. ¶¶ 52-53.) The same three Local 236 members also sat
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on the hearing panel. (Id. ¶ 53.)
B.
Procedural History
On September 17, 2014, CNC commenced this action against Local
236 alleging breach of contract and fraud, and asserting federal question
jurisdiction under the LMRA. (Compl. ¶¶ 4, 45-67, Dkt. No. 1.) Local 236
moved to dismiss for failure to state a claim. (Dkt. No. 10.) CNC
amended its complaint to elaborate on its allegations related to the
grievance procedure in the CBA. (Am. Compl. ¶¶ 42-61.) Local 236
requested to withdraw its motion to dismiss the complaint, (Dkt. No. 14),
which the court granted, (Dkt. No. 15). Local 236 then filed the now
pending motion to dismiss CNC’s amended complaint. (Dkt. No. 16.)
III. Standard of Review
The standard of review under Fed. R. Civ. P. 12(b)(6) is well
established and will not be repeated here. For a full discussion of the
standard, the court refers the parties to its prior opinion in Ellis v. Cohen &
Slamowitz, LLP, 701 F. Supp. 2d 215, 218 (N.D.N.Y. 2010), abrogated on
other grounds by Altman v. J.C. Christensen & Assocs., Inc., 786 F.3d
191 (2d Cir. 2015).
IV. Discussion
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A.
Breach of Contract
CNC alleges Local 236 violated the CBA’s most favored nations
clause by providing more desirable terms in its agreement with
Adirondack Cabling. (Am. Compl. ¶¶ 37, 41.) Local 236 argues that the
breach of contract claim must be dismissed because the LMC’s denial of
the grievance is final and binding on the parties. (Dkt. No. 16, Attach. 1 at
6-9.) CNC opposes and asserts the court may review its claim because it
was denied due process during the dispute resolution process. (Dkt. No.
17 at 4-5.) Specifically, CNC contends the LMC’s decision should be
vacated because the committee was biased and failed to follow the
grievance procedure. (Id. at 5.) Local 236 argues that CNC can only
advance these arguments in a claim to vacate the LMC decision—not in a
breach of contract claim, and it failed to timely do so. (Dkt. No. 16,
Attach. 1 at 10-12.)
Section 301 of the LMRA authorizes suits by employers and labor
unions in federal court to adjudicate violations of CBAs. See 29 U.S.C.
§ 185(a). Congress, however, expressed that “[f]inal adjustment by a
method agreed upon by the parties is . . . the desirable method for
settlement of grievance disputes arising over the application or
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interpretation of an existing [CBA].” Id. § 173(d). Accordingly, parties
must resort to the agreed upon grievance procedure within a CBA to
resolve all claims subject to arbitration. See United Steelworkers v. Am.
Mfg. Co., 363 U.S. 564, 567-69 (1960); United Steelworkers v. Warrior &
Gulf Nav. Co., 363 U.S. 574, 582-83 (1960). Courts will enforce final and
binding grievance determinations and cannot “reweigh the merits of [a]
grievance.” Gen. Drivers, Local Union No. 89 v. Riss & Co., 372 U.S.
517, 519 (1963). Such determinations are final and binding if designated
by the parties in the CBA. See id.
Here, the CBA provides that “[i]n absence of a deadlock, the [LMC’s]
decision shall be final and binding.” (Am. Compl. ¶ 46 (citing CBA
§ 1.07).) The LMC deadlocked in December 2013, but the LMC directed
a new hearing and then denied CNC’s grievance. (Id. ¶¶ 49, 50, 52.)
Nothing in the CBA suggests that the LMC cannot reconsider a deadlock.
At this point, the LMC did not need to submit the grievance to the Council
because the LMC made a determination. (Id. ¶ 47 (citing CBA § 1.08).)
Because the LMC ultimately reached a decision, its denial became the
final and binding determination. (Id. ¶ 46 (citing CBA § 1.07)); see IBEW,
Local 910 v. Roberts, 992 F. Supp. 132 134-35 (N.D.N.Y. 1998)
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(enforcing a decision by a joint union-employer grievance panel as final
and binding). Having already submitted to the grievance procedure, CNC
attempts to re-litigate its claim that Local 236 violated the most favored
nations clause of the CBA. The LMC denied this grievance, and its
decision is final and binding on the parties. See Gen. Drivers, 372 U.S. at
519.
CNC directs its arguments to the alleged bias of the LMR members
and that the grievance procedures were not properly followed. (Dkt. No.
17 at 4-7.) These arguments are proper on a petition to vacate a labor
arbitration award. See Harry Hoffman Printing, Inc. v. Graphic Commc’n
Int’l Union, Local 261, 950 F.2d 95, 98 (2d Cir. 1991) (employer petitioning
to vacate award arguing panel exceeded its authority); Skyview Owners
Corp. v. SEIU, Local 32BJ, No. 04 Civ.4642, 2004 WL 2244223, at *4-5
(S.D.N.Y. Oct. 5, 2004) (employer petitioning to vacate award arguing the
arbitrator was biased). Here, however, CNC failed to timely petition to
vacate the LMR’s decision. See Local 802, Associated Musicians v.
Parker Meridien Hotel, 145 F.3d 85, 88 (2d Cir. 1998) (applying the ninetyday statute of limitations from N.Y. C.P.L.R. 7511(a)); Harry Hoffman
Printing, Inc., 912 F.2d at 610-12 (same). CNC did not file its complaint
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until September 17, 2014, which is at least 140 days after the LMC
decision. (Compl.) CNC cannot now make such arguments under the veil
of a breach of contract claim. See, e.g., Tecam Elec. M.V. Inc. v. Local
Union 701 of IBEW, No. 01 C 3333, 2001 WL 1338985, at *4 (N.D. Ill.
Oct. 29, 2001) (holding procedural errors in the grievance process must
be challenged on a timely motion to vacate and “cannot be the basis of [a]
breach of contract claim”). Accordingly, CNC is bound by the final and
binding LMR decision and is precluded from re-litigating its grievance as a
breach of contract claim.
B.
Fraud
CNC also alleges that Local 236 fraudulently induced it into
believing that the CBA had the same terms as the single employer
agreement Local 236 signed with Adirondack Cabling. (Am. Compl.
¶¶ 74, 77-80.) CNC alleges that, as a result of the fraud, it had to make
greater payments to Local 236 and lost contracts to Adirondack Cabling.
(Id. ¶¶ 84-85.) Local 236 argues that CNC’s state law fraud claim is
preempted by the LMRA and must be dismissed. (Dkt. No. 16, Attach. 1
at 20-22.) Alternatively, Local 236 argues that CNC recasted its breach of
contract claim as a fraud claim, and CNC has not sufficiently alleged
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damages. (Id. at 23-25.)
Section 301 of the LMRA preempts state law claims that are
“inextricably intertwined with consideration of the terms of the labor
contract.” Allis-Chalmers Corp. v. Lueck, 471 U.S. 202, 213 (1985); see
Wall v. Construction & Gen. Laborers’ Union, Local 230, 224 F.3d 168,
178 (2d Cir. 2000). This rule follows from Supreme Court holdings that
federal substantive law governs the enforcement of CBAs, see Textile
Workers Union v. Lincoln Mills, 353 U.S. 448, 451 (1957), and
“uniformly . . . prevails[s] over inconsistent local rules,” Local 174,
Teamsters v. Lucas Flour Co., 369 U.S. 95, 104 (1962).
However, not all state law claims which involve a provision of the
CBA will be preempted. See Allis-Chalmers Corp., 471 U.S. at 211;
Lingle v. Norge Div. of Magic Chef, Inc., 486 U.S. 399, 413 (1988).
Preemption lies only if the court must interpret the CBA to resolve the
claim. See Lingle, 486 U.S. at 413 (holding that a state retaliatory
discharge claim was not preempted because the claim only required a
fact-finder to consider the conduct and motivation of the employer and
employee); Foy v. Pratt & Whitney Grp., 127 F.3d 229, 235 (2d Cir. 1997)
(holding that a negligent misrepresentation claim was not preempted
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because it was based on conduct of the parties and only required a
reference to the CBA terms).
The preemption analysis begins with the elements of CNC’s state
fraud claim. See Foy, 127 F.3d at 233. To plead a claim of fraud, CNC
must show: (1) a material misrepresentation of a fact made by Local 236;
(2) knowledge of that fact’s falsity; (3) an intent to induce reliance; (4)
justifiable reliance by CNC; and (5) CNC’s damages. See Eurycleia
Partners, LP v. Seward & Kissel, LLP, 12 N.Y.3d 553, 559 (2009); see
also Loreley Fin. (Jersey) No. 3 Ltd. v. Wells Fargo Sec., LLC, 797 F.3d
160, 170 (2d Cir. 2015). Here, CNC alleges that Local 236 falsely
informed CNC that the CBA contained the same terms as Local 236’s
agreement with Adirondack Cabling in order to collect more money from
CNC. (Am Compl. ¶¶ 73-74, 78, 80.) As a result, CNC alleges it relied on
Local 236’s statement and suffered damages by paying more to Local 236
and by losing contracts to Adirondack Cabling. (Id. ¶¶ 77, 82, 84-85.)
Local 236 argues that the court must interpret the CBA to determine
the element of damages. (Dkt. No. 16, Attach. 1 at 22.) Although “[t]he
boundary between claims requiring ‘interpretation’ of a CBA and ones that
merely require such an agreement to be ‘consulted’ is elusive,” Wynn v.
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AC Rochester, 273 F.3d 153, 158 (2d Cir. 2001), the court agrees that it
must interpret the CBA to resolve CNC’s fraud claim. A determination as
to damages may require such interpretation, but the court primarily finds it
would have to interpret the CBA to determine whether Local 236 made a
material misrepresentation. This analysis demands more than a “simple
reference to the face of the CBA” but involves the interpretation of the
most favored nations clause and a comparison of two labor agreements.
Cf. id.; Foy, 127 F.3d at 235.
CNC alleges fraud premised on Local 236’s purported violation of
the most favored nations clause. (Am. Compl. ¶ 9 (citing CBA § 2.02));
see Allis-Chalmers Corp., 471 U.S. at 215 (noting that preempted state
tort arose from obligation established by CBA). Whether Local 236 made
such misrepresentation calls for the court to interpret whether Local 236
violated its duty under the clause. To establish the violation, the court
must compare the terms of the Adirondack Cabling agreement with the
CBA. The court then must determine whether such terms are in fact more
favorable. If Local 236 did not provide more favorable terms to
Adirondack Cabling, then it would not have made a material
misrepresentation to CNC, and the fraud claim must fail.
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The court’s analysis here requires a closer look at the CBA than in
Wynn or Foy. In both cases, the plaintiffs alleged their employers made
false representations about benefits they were entitled to in a layoff.
See Wynn, 273 F.3d at 158; Foy, 127 F.3d at 231. To evaluate whether
the element of misrepresentation required interpretation of the CBAs, the
courts looked to the CBAs’ terms. Wynn, 273 F.3d at 158; Foy, 127 F.3d
at 233-34. In both cases, the plain language demonstrated that the CBAs
either did or did not provide for the benefits. Wynn, 273 F.3d at 158; Foy,
127 F.3d at 233-34. As such, the courts held they merely consulted rather
than interpreted the CBAs. Wynn, 273 F.3d at 158; Foy, 127 F.3d at 23334. Here, CNC’s fraud claim relates to whether Local 236 misrepresented
that it violated its duty under the CBA. Unlike Wynn or Foy, it is not
apparent on the face of the CBA whether Local 236 violated that duty.
Rather, the court must look to the terms of another labor agreement,
compare it with the CBA, and then determine whether Local 236 provided
more favorable terms to another party. Accordingly, CNC’s fraud claim is
inextricably intertwined with the CBA and preempted by federal labor law.
See Allis-Chalmers Corp., 471 U.S. at 213. As such, CNC’s fraud claim is
dismissed.
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V. Conclusion
WHEREFORE, for the foregoing reasons, it is hereby
ORDERED that Local 236's motion to dismiss (Dkt. No. 16) is
GRANTED; and it is further
ORDERED that CNC’s amended complaint (Dkt. No. 12) is
DISMISSED; and it is further
ORDERED that the Clerk close the case; and it is further
ORDERED that the Clerk provide a copy of this MemorandumDecision and Order to the parties.
IT IS SO ORDERED.
November 5, 2015
Albany, New York
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