On appeal from Superior Court of New Jersey, Law Division, Bergen County.
Approved for Publication July 7, 1995
Before Judges Skillman, Wallace and Kleiner. The opinion of the court was delivered by Skillman, J.A.D.
The opinion of the court was delivered by: Skillman
Plaintiffs Donald Brown and Joseph Smith *fn1 are retired former employees of defendant Port Authority of New York and New Jersey (Port Authority) and members of the defendant Port Authority Police Superiors Officers Association (Association), which is the exclusive union representative for bargaining unit members including Brown and Smith. After plaintiffs retired, the Port Authority and the Association entered into a new collective bargaining agreement (Agreement) on April 13, 1988, covering the period between July 28, 1985 and July 22, 1989.
On April 12, 1989, one day less than a year after the execution of the Agreement, plaintiffs filed this lawsuit alleging that the Port Authority breached its collective bargaining agreements with the Association by failing to follow the grievance procedures contained therein and "wrongfully" failing to provide plaintiffs with medical insurance coverage. *fn2 Plaintiffs' complaint also alleged that the Association breached its duty of fair representation by arbitrarily ignoring or processing in a perfunctory manner meritorious grievances and failing to protect plaintiffs' rights to medical insurance coverage. The complaint further alleged that the Port Authority and the Association engaged in "collusion." Plaintiffs named not only the Port Authority and the Association but also various officers of the Association as defendants. Discovery disclosed that plaintiffs' rather nebulous claims were based primarily on defendants' negotiation and execution of the April 13, 1988 Agreement. The relief plaintiffs sought was limited to compensatory and punitive damages.
The trial court granted the Port Authority's motion to dismiss the complaint on the ground that plaintiffs had failed to comply with N.J.S.A. 32:1-163, which requires a party seeking money damages against the Port Authority to file a notice of claim at least sixty days before filing suit and, after satisfying this prerequisite, to file suit within one year of accrual of the cause of action. The court concluded that plaintiffs' cause of action accrued on April 13, 1988, when the new collective bargaining agreement was executed, and that plaintiffs failed to serve any form of notice of claim upon the Port Authority before filing this suit one year later. The court also granted the Association's motion to dismiss insofar as plaintiff's complaint related to medical insurance coverage on the theory that because plaintiffs were precluded from proceeding against the Port Authority, "all claims arising out of [the Port Authority and Association] negotiations for new benefits must be dismissed." However, the court indicated that it would preserve for determination at trial plaintiffs' claim that the Association had failed to process plaintiffs' grievances in good faith. The court also dismissed plaintiffs' claims against the individual defendants and their punitive damages claims against the Association.
The Port Authority subsequently filed a motion to supplement the court's order granting summary judgment to specifically set forth that any and all claims for indemnification and/or contribution were dismissed with prejudice. After reviewing this motion, the trial court decided sua sponte to reconsider the prior summary judgment in favor of the Port Authority as well as the partial summary judgment in favor of the Association. The court issued a letter opinion on January 5, 1994, which stated that upon reconsideration it construed "N.J.S.A. 32:1-163 as not applicable to actions arising from a labor contract dispute." The court also stated that "federal law is controlling and preempts state law in matters involving labor disputes." However, the court concluded that plaintiffs' complaint should remain dismissed, not because plaintiffs had failed to comply with the notice of claim provisions of N.J.S.A. 32:1-163 but because plaintiffs' claims are "subject to [the] collective bargaining agreement between the Port Authority and the union" and "plaintiffs are required to exhaust grievance procedures or remedies provided in the collective bargaining agreement." The trial court further concluded, without consideration of the provisions of the collective bargaining agreement governing the processing of employee grievances, that "plaintiffs should have an opportunity to have their employment contract grievance resolved." The court memorialized this decision by an order entered on January 5, 1994, which dismissed plaintiffs' complaint against the Port Authority and the Association "with prejudice, upon the condition that the matter is returned to binding arbitration."
The Port Authority appeals from the part of this order that requires it to participate in arbitration and seeks the entry of an order dismissing all claims against the Port Authority with prejudice and without conditions. Plaintiffs appeal from the part of the January 5, 1994 order that dismisses with prejudice the part of their complaint relating to "their failure to receive increased medical insurance benefits."
We conclude that the trial court erred in holding that plaintiffs' claims are governed by federal labor law. We further conclude that plaintiffs failed to comply with the provisions of N.J.S.A. 32:1-163 governing suits for money damages against the Port Authority and consequently its action against the Port Authority must be dismissed. In addition, the trial court erred in ordering the Port Authority and the Association to participate in an arbitration dealing with the part of plaintiffs' complaint relating to the processing of their grievances.
Section 2(2) of the National Labor Relations Act (NLRA), 29 U.S.C.A. 152, provides in pertinent part:
The term "employer" ... shall not include the United States or any wholly owned Government corporation, ... or any State or political subdivision thereof ....
In NLRB v. Natural Gas Util. Dist., 402 U.S. 600, 602-03, 91 S. Ct. 1746, 1748, 29 L. Ed. 2d 206, 209 (1971), the Court held that "federal, rather than state, law governs the determination, under § 2(2), whether an entity created under state law is a 'political subdivision' of the State and therefore not an 'employer' subject to the Act." The Court stated that "Congress enacted the § 2(2) exemption to except from Board cognizance the labor relations of federal, state and municipal governments, since governmental employees did not usually enjoy the right to strike." Id. at 604, 91 S. Ct. at 1749, 29 L. Ed. 2d at 209. The Court noted that the National Labor Relations Board (NLRB) had ruled that this exemption applies to "entities that are either (1) created directly by the state, so as to constitute departments or administrative arms of the government, or (2) administered by individuals who are responsible to public officials or to the general electorate." Id. at 604-05, 91 S. Ct. at 1749, 29 L. Ed. 2d at 210. The Court concluded that under the second NLRB test, a utility district created by petition of a group of local property owners constituted a ...