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MZM Construction Company Inc. v. New Jersey Building Laborers Statewide Benefit Funds

United States District Court, D. New Jersey

August 14, 2019

MZM CONSTRUCTION COMPANY, INC., d/b/a MZM CONSTRUCTION MANAGEMENT & TRANSPORTATION, Plaintiff,
v.
NEW JERSEY BUILDING LABORERS' STATEWIDE BENEFIT FUNDS, Defendants.

          OPINION

          KEVIN McNULTY UNITED STATES DISTRICT JUDGE

         Pending before the Court is a motion for an indicative ruling filed by defendant New Jersey Building Laborers' Statewide Benefit Funds ("Funds"). (DE 19). In this declaratory judgment action, plaintiff MZM Construction Company, Inc. ("MZM"), a subcontractor, seeks to preclude arbitration and void a short form agreement ("SFA") that allegedly incorporated a statewide collective bargaining agreement ("CBA") by reference.

         A preliminary word about the backwards procedural posture of this case: The cases governing arbitrability, cited herein, are commonly decided in the context of a motion to compel arbitration brought by the party who seeks it. This action, however, seeks a preemptive declaratory judgment that arbitration should not occur, and is brought by the party opposing arbitration. Because arbitration had been scheduled, MZM was thrown back on the expedient of seeking a preliminary injunction against arbitration. The Court was thereby called upon to assess the likelihood of success on the merits; the "merits," however, related only to the likelihood that the claims were arbitrable. The injunction application, then, was the functional equivalent of an opposition to a motion to compel arbitration by the Funds. The preliminary injunction granted by the Court consists of little more than obedience to the Third Circuit's command that arbitration cannot be ordered unless and until antecedent questions of fact are resolved. Guidotti v. Legal Helpers Debt Resolution, L.L.C., 716 F.3d 764, 771 (3d Cir. 2013). In declaratory judgment actions, it is sometimes helpful to notionally realign the parties in their natural configuration. At any rate, however, the standards governing arbitrability do not depend on who sued first, and, mutatis mutandis, must be applied in the same manner to a motion to compel or a declaratory judgment action.

         MZM sought a preliminary injunction to stop an arbitration hearing that had been unilaterally scheduled by the Funds. The Funds argued that MZM was delinquent on contributions that were due under a CBA, and that MZM had agreed to arbitrate that issue based on an arbitration clause in that CBA. In an oral ruling, I granted the preliminary injunction staying the arbitration pending further factual development. The Funds' appeal from that order is pending before the U.S. Court of Appeals for the Third Circuit.

         The Funds request that this Court issue an order, pursuant to Federal Rule of Civil Procedure 62.1, indicating that, if the matter were remanded from the Court of Appeals, this Court would provide relief from, or reconsider, its December 19, 2018 Order that (1) preliminarily enjoined arbitration; (2) denied the Funds' motion to dismiss the complaint because the arbitrability issue required further factual development; and (3) ordered expedited discovery. (DE 16). The Funds seek relief from a "final judgment or order" under Federal Rule of Civil Procedure 60(b) and for reconsideration under Rule 54(b). For the reasons provided below, the motion will be denied.

         I. Background[1]

         In 1992, Marjorie Perry and two partners founded plaintiff MZM Construction Company, Inc. ("MZM"), a subcontractor headquartered in Newark, New Jersey. (Perry Decl. ¶¶1-4). MZM is a construction firm that specializes in construction and construction management, waste management and transportation, and renovations. (Perry Decl. ¶3). MZM has performed work on the New Jersey Performing Arts Center, MetLife Stadium, Newark International Airport, and New Jersey Transit facilities. (Perry Decl. ¶4). In 1994, Perry became the sole shareholder of MZM. (Perry Decl. ¶2).

         Over the years, MZM has used union laborers when directed to do so by a project owner or general contractor on a particular project. (Perry Decl. ¶6). In such a case, Perry would contact the representatives of the union and request the No. of laborers needed for the project. (Perry Dec. ¶7). On those projects, Perry would pay the union rates as well as benefits. (Perry Decl. ¶7). This pattern of dealing between Perry and the unions started in 1992 and continues to the present day. (Id.).

         Even though Perry used union laborers from time to time, she did not execute a collective bargaining agreement with the unions. (Id., ). In 2002, however, Perry signed a one-page "Short Form Agreement" ("SFA"). (Perry Decl. ¶9). MZM was working on Terminal C at Newark Liberty Internal Airport and was utilizing union laborers for the project. (Id.). That project began in 2001 and was completed in 2004. (Id.). In 2002, Perry was approached by a union representative, Joe Taylor. (Id.). Perry had dealt with Taylor for many years. (Id.). Taylor told Perry that he needed her to sign a one-page document for the ongoing Newark Airport job because "the union had nothing on record for MZM for the Newark Airport job." (Id.). Taylor understood that MZM was an "open shop," and did not indicate that he wanted Perry to sign an ongoing collective bargaining agreement. (Id.). Taylor orally advised Perry that the agreement was "a single project agreement" for the Newark Airport job only. (Id.). Taylor also told Perry that if Perry did not sign the agreement, "the union would not provide any more laborers for the Newark Airport job." (Id.).

         The 2002 SFA, which makes no mention of arbitration, provides as follows:

The undersigned Employer, desiring to employ laborers from the New Jersey Building Laborer Local Unions and District Councils affiliated with the Laborer's International Union of North America, hereinafter the "Unions," and being further desirous of building, developing and maintaining a harmonious working relationship between the undersigned Employer and the said Unions in which the rights of both parties are recognized and respected, and the work accomplished with the efficiency, economy and quality that is necessary in order to expand the work opportunities of both parties, and the Unions desiring to fulfill the undersigned Employer's requirements for such laborers, the undersigned Employer and Unions hereby Agree to be bound by the conditions as set forth in the 1999 Building, Site and General Construction Agreement, which Agreement expires April 30, 2002, and the successor Agreement to the 1999 Building Site and General Construction Agreement, herein referred to as the 2002 Building, Site and General Construction Agreement, which successor Agreement becomes effective May 1, 2002, both of which Agreements are incorporated herein as if set forth in full.

(DE 1-4). MZM was identified as the employer in the agreement, and Perry signed as MZM's authorized representative. (Id.).

         Relying on Taylor's representations, and to avoid any labor interruptions on the Newark Airport project, Perry signed the agreement. (Perry Decl. ¶9). Taylor did not provide Perry with a copy of the 2002 SFA. Perry did not have any further communications with the union regarding the 2002 SFA until approximately sixteen years later, in 2018. (Perry Decl. ¶¶11-12). Between 2002 and 2018, seventy percent or more of MZM's projects in New Jersey were non-union jobs for which no contributions were paid or sought by the Funds. (Perry Decl. ¶15).

         In 2018, the accountants for the Funds requested access to MZM's "books and records," which Perry granted. (Perry Decl. ¶12). On June 27, 2018, the Funds' accountant told Perry that she owed "contributions on a non-union job that was completed in 2016, which was a federal prevailing wage project." [Id.). In response, Perry requested a copy of the document that the Funds' accountant relied upon in claiming that fringe benefits were owed. (Perry Decl. ¶13).

         The Funds' accountant produced a copy of the 2002 SFA. (Id.). Shortly thereafter, the Funds also provided Perry with a copy of a Collective Bargaining Agreement between the "Employer" and "the Building Laborers' District Councils and Local Unions of the State of New Jersey ('Union') That CBA says it covers a term beginning May 1, 2002 and ending April 30, 2007, with automatic renewal provisions. (DE 1-5 (hereinafter "2002 CBA"); see also Perry Decl. ¶16). This 2002 CBA is not signed by anyone. It does not identify a contractor or employer on the signature line. (2002 CBA at p.69). Prior to receiving this copy of the 2002 CBA in 2018, Perry had never before seen this or any other CBA to which MZM was a signatory. (Perry Decl. ¶18). MZM essentially asserts that no additional payment is due because it was not a signatory to any CBA with the Funds.

         The 2002 CBA requires the (unspecified) "Employer" to "remit fringe and benefit contributions to the Funds." (Kemple Decl. ¶5; 2002 CBA §14.00-14.90). As part of its opposition to MZM's motion before this Court, the Funds submitted a No. of "Employer Contribution Reports," from May of 2012 and March through July of 2016. (Kemple Decl. ¶14, & Ex. 7). Those reports, above Perry's signature on behalf of MZM, provide the following:

THE UNDERSIGNED, an authorized representative of the above Employer, hereby agrees, on behalf of the Employer, to bind the Employer to all the provisions, terms and conditions of . . . the Collective Bargaining Agreement by and between the Building Construction Laborers' District Councils and Local Unions of the State of New Jersey and the Building, Site and General Construction Contractors and Employers, which Agreements and Declarations of Trusts and Collective Bargaining Agreements (the Agreements) are incorporated herein by reference.

(Id.). That provision is not contained in all the reports, and it does not mention arbitration. Where it does appear, the font size of the provision is much smaller as compared to the other text in the reports. Additionally, each report is for a specific time period, [2] identifies a particular "jobsite," and provides contributions for a particularly named employee. (Id.).

         On November 5, 2018, counsel for the Funds sent a demand letter to MZM. (DE 1-7). That letter stated that MZM owed $231, 650.65 in contributions, including interest and audit fees, and that the failure to submit payment would cause the Funds to submit the matter to arbitration on Tuesday, November 27, 2018. [Id.). The Funds assert that the 2002 SFA incorporated the 2002 CBA by reference and that therefore the matter is arbitrable. (Kemple Decl. ¶3).[3]

         The 2002 CBA does not contain a single, broad arbitration clause, but instead, provides two distinct arbitration provisions, one for jurisdictional and the other for non-jurisdictional disputes.

         The CBA's first arbitration provision (§2.20), titled "Jurisdictional Disputes," provides the following:

It is agreed between the Union and the Employer that this Agreement is applicable to all construction work that is described in this Agreement or the Manual of Jurisdiction of the Laborers' International Union of North America, which is incorporated herein by reference and any other work within the recognized and traditional jurisdiction of the Union and shall be performed in accordance with the terms of this Agreement. If the Union is aggrieved over any assignment, the matter shall be referred to the regional office of both contesting Unions in an effort to seek a resolution. If the matter fails to be satisfactorily resolved in this manner within three business days, the parties agree to submit the matter to the New Jersey State Board of Mediation for binding arbitration on an expedited basis. Any party that fails to abide by and cooperate with this expedited procedure shall be deemed to be in default and an order shall be entered by the Arbitrator in favor of the opposing party. Pending an orderly resolution of the matter, there shall be no interruption of work by a work stoppage, strike or refusal to refer men to the project by the Union.

(2002 CBA, §2.20). This provision appears to cover disputes between unions over the assignment of work. See Office & Prof'I Emples. Int'l Union v. Sea-Land Serv., Inc., 210 F.3d 117, 118 (2d Cir. 2000) ("a jurisdictional labor dispute arises when two or more unions claim, under their respective collective bargaining agreements ... the right to perform the same work assignment." (citing Transportation-Communication Emp. Union u. Union Pac. Railroad, 385 U.S. 157, 161 (2000))).

         The CBA's second arbitration provision (2002 CBA, §21.20), covering non-jurisdictional disputes, provides for a three-step grievance procedure, the third step of which is arbitration. This grievance procedure governs all "questions or grievances" that involve the "interpretation and application" of the 2002 CBA, "or any grievance concerning any term or condition of work." (2002 CBA, §21.20; see also 2002 CBA §24.10 ("Any conflict in the interpretation of this agreement not settled directly by the Employer and the local Union shall be submitted to the Building Contractors Association of New Jersey and the Laborers' International Union of North America, Eastern Region office ... for resolution. ... If the foregoing parties fail to agree as to a resolution of the dispute, the dispute shall be subject to the grievance and arbitration procedure herein.")).

         The CBA states that it incorporates by reference the "Agreements and Declarations of Trust for the Funds" ("Trust Agreements"). (Kemple Decl. ¶6). The Trust Agreements provide that if an employer is in default, the Trustees "may take any action necessary or appropriate to enforce payment of the contributions, interest, damages, and expenses provided for herein, including, but not limited to, proceedings at law or in equity." (Kemple Decl., Ex. 3, Article V, §4). The Trust Agreements further provide that the "Fund and Trustees shall not be required to exhaust any grievance or arbitration procedure provided by a Collective Bargaining Agreement or otherwise with respect to the enforcement of such Employer obligations, but rather shall have immediate access to the courts, as provided under applicable law, or to designate a permanent arbitrator to hear and determine collection disputes." [Id.).

         On November 20, 2018, MZM filed suit in this Court and moved for a temporary restraining order and preliminary injunction to stay an arbitration hearing which the Funds had unilaterally scheduled for November 27, 2018. [See Cplt.). MZM's complaint alleges two causes of action. The first count, under the Declaratory Judgment Act, 28 U.S.C. §§ 2201 and 2202, asserts that MZM is not a party to or bound by the 2002 CBA, and is not required to arbitrate under the 2002 CBA. (Cplt. ¶¶49-67). The second count alleges fraud in the execution, in that Perry signed the 2002 SFA without knowledge or a reasonable opportunity to obtain knowledge of the agreement's essential terms (which were incorporated from elsewhere). (Cplt. ¶¶68-89).

         The November 27, 2018 arbitration was adjourned on consent, and the Court heard oral argument on the preliminary injunction application on December 12, 2018. (DE 15). The Court issued an Order, dated December 19, 2018, preliminarily enjoining the arbitration and ordering expedited discovery as to whether this matter is arbitrable. (DE 16).

         The preliminary injunction, as I say, was in the nature of a stay pending resolution of factual issues. The Court determined that a preliminary injunction would "preserve the status quo" and that denial would have effectively "grant[ed] the relief that one side wants." (1T36:12-16). On the first factor for a preliminary injunction, likelihood of success on the merits of the arbitrability question, there was substantial evidence that Perry was not informed as to "the scope of what she was signing or realize that she was entering into a wide-ranging agreement that would extend into the indefinite future and a broad variety of jobs as opposed to just the one she was on at the time of 2002." (1T36:19-25). The passage of time since 2002, and a course of dealing that did not include enforcement of the agreement, suggested that the parties did not believe that they were entering into an ongoing CBA. (1T37:1-5). Additionally, fraud in the execution, a fact-dependent issue, required further development. (1T37:6-10).

         Forcing arbitration on a party who had not entered into an agreement to do so made the second factor, irreparable harm, weigh in favor of MZM. (1T37:13-18). In weighing the parties' respective interests, the only harm to the Funds, in the event that the claims were determined to be arbitrable, was further delay. (1T37:17-23). The public interest factor did not weigh in favor of either party. (1T38:3-7).

         The Court granted the preliminary injunction, temporarily halting arbitration to allow development of a factual record so the arbitrability issue could be decided on a complete record at the summary judgment stage or tried, if necessary. (1T38:8-39:13). The Court stressed that its decision on the preliminary injunction was not a prejudgment of the merits. (1T39:22-24).

         On December 20, 2018, the Funds filed a Notice of Appeal of this Court's December 19, 2018 Order. (DE 17). On February 8, 2019, the Funds filed the motion for an indicative ruling under Federal Rule of Civil Procedure 62.1, and for relief under Rules 54(b) and 60(b), that is now before the Court. The Funds essentially argue that the Court should reverse its preliminary injunction ruling based on "newly discovered" evidence, a ruling which would moot the Funds' appeal. (DE 19-2). The alleged newly discovered evidence is another SFA executed by Perry, dating from October 1999. (Id.). In substance, this 1999 SFA is similar to the 2002 SFA:

The Undersigned Contractor or Employer, desiring to employer laborers from the Building Laborer Local Unions and District Councils affiliated with the Laborers International Union of North America and being further desirous of building, developing and maintaining a harmonious working relationship between the undersigned contractor and the Building Laborers Local Unions and District Councils of New Jersey in which the rights of both parties are recognized and respected, and the work accomplished with the efficiency, economy and quality that is necessary in order to expand the work opportunities of both parties, and the Building Laborers Local Unions and District Councils of New Jersey desiring to fulfill the Undersigned Contractor's requirements for such laborers, the Undersigned Contractor and the Building Laborers Local Unions and District Councils of New Jersey hereby agree to be bound by the terms and conditions as set forth in the Building, Site and General Construction Agreement by and between the Building Laborer Local Unions and District Councils of New Jersey and various Building, Site and General Construction Contractors and Employers which Agreement is incorporated herein as if set forth in full.

(1999 SFA, DE 19-2). Perry signed this 1999 SFA as MZM's principal. (See id.).[4] The Funds contend that this 1999 SFA "substantially reduces" the likelihood of success on MZM's claims. (DE 19-2, ¶7). The Funds proffer that this evidence was not produced earlier because records that predate 2001 are kept "off-site." (DE 19-2).

         II. Standard

         A. Indicative ruling under Fed.R.Civ.P. 62.1

         The parties seem to agree, or assume, that the Funds' pending appeal of the preliminary injunction deprives the Court of all jurisdiction to dissolve the injunction until the Court of Appeals returns jurisdiction to this Court. The situation is not quite so straightforward.

         Generally speaking, "[t]he filing of a notice of appeal is an event of jurisdictional significance - it confers jurisdiction on the court of appeals and divests the district court of its control over those aspects of the case involved in the appeal." Griggs v. Provident Consumer Disc. Co.,459 U.S. 56, 58 (1982); see also Kull v. Kutztown Univ. of Pa.,543 Fed.Appx. 244, 248 (3d Cir. 2013). In such circumstances, the district court is prohibited from taking any action that ...


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