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Beacon Sales Acquisition, Inc. v. Board of Trustees of Teamsters Industrial Employees Pension Fund

United States District Court, D. New Jersey

November 12, 2019



          Kevin McNulty United States District Judge

         Pending before the Court is a motion for preliminary injunction filed by the plaintiff, Beacon Sales Acquisition, Inc. d/b/a Arzee Supply Corporation ("Beacon"). (DE 3). Beacon seeks to enjoin an arbitration commenced by defendants: the Teamsters Industrial Employees Pension Fund (the "Pension Fund") and Welfare Fund (the "Welfare Fund," and together with the Pension Fund, the "Funds"); and the Boards of Trustees of the Pension Fund and Welfare Fund (collectively, unless otherwise specified, "the Trustees"). The arbitration hearing is scheduled to commence on December 16, 2019.

         Defendants allege that Beacon was delinquent on contributions that were due under collective bargaining agreements (CBAs) signed by Beacon as the employer. Defendants also assert that Beacon contributed on behalf of ineligible employees, causing Defendants to pay medical expense benefits that were not in fact due. Each of these claims, say the Funds, is to be resolved via arbitration in accordance with the terms of the trust indentures. The Funds maintain that Beacon is bound by the arbitration clauses in the trust indentures because the CBAs signed by Beacon explicitly or impliedly incorporate the terms of the trust indentures.

         Beacon asserts that it never agreed to arbitrate these claims. Although Beacon signed the CBAs, it says it never signed the trust indentures and therefore cannot be bound by the indentures' arbitration clauses.

         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, is brought by the party opposing arbitration, and it seeks a preemptive declaration or injunction that arbitration should not occur. The caselaw principles governing arbitrability, mutatis mutandis, apply equally to a motion to compel or to enjoin arbitration.

         For the reasons provided below, Beacon's motion (DE 3) will be denied in part and granted in part.

         I. Summary[1]

         Plaintiff Beacon is a distributor of roofing materials. The Fund defendants are multiemployer pension plans within the meaning of the Employee Retirement Income Security Action, as amended ("ERISA"). (Compl. ¶¶ 9, 11).

         A. The CBAs

         Beacon is a signatory to a series of CBAs with Teamsters Local Union No. 560. These govern the wages, hours, and conditions at four Beacon facilities in New Jersey and New York. Each of the CBAs covers a period of three years; the CBAs at issue cover (1) January 1, 2011 to December 31, 2013; (2) January 1, 2014 to December 31, 2016; and (3) January 1, 2017 to December 31, 2019. (DE 14-1 at 6-21). The relevant provisions of the CBAs are materially identical. (DE 18-1, 18-2, 18-3).

         The CBAs require Beacon to remit contributions to the Funds on behalf of covered employees. (Compl. ¶ 17). In each CBA, pursuant to Article 14, Section 1, Beacon agreed:

to make contribution at the rates set forth below and participate in the TIE Pension and Welfare Funds, pursuant to the Trust Indenture, its rules and regulations as amended.

(DE 14-1 at 6-21 (emphasis added)). Monthly contribution obligations are established in each CBA based on the No. of hours each employee worked. Under Section 4, Beacon also agreed to allow the Funds to inspect and audit its records in order to verify contributions remitted by Beacon to the Funds. (Id.).

         B. The Trust Indenture

         As noted above, the CBA refers to the "Trust Indenture." The trust indentures at issue here were entered into on April 10, 2014. They are (a) the Third Restated Agreement and Declaration Trust of Teamsters Industrial Employees Pension Fund and (b) the Third Restated Agreement and Declaration Trust of Teamsters Industrial Employees Welfare Fund. (DE 3-4 and DE 3-5). Those two agreements are identical, except that the first is for the Pension Fund and the second for the Welfare Fund."[2]

         Beacon is not a direct signatory to the Trust Indenture; the parties to the Trust Indenture are the trustees of the relevant Fund, consisting of union and employer trustees. Each Trust Indenture begins by acknowledging that it is being executed in connection with CBAs that will endow the Funds:

WHEREAS, the Union will be continuing to enter into collective bargaining agreements with the Employers and with other participating Employers requiring amongst other things, payment by said Employers to the Pension Fund [or Welfare Fund] of periodic contributions for the purpose of providing inter alia, for eligible employees, through the self-administration, a plan of retirement benefits. . .

(DE 3-4 at 2). Article I, Section 4, goes on to define "Employer" as follows:

an Employer who employs Employees, as defined in Section 5 herein below, in a bargaining unit represented by the Union, and pursuant to a collective bargaining agreement with the Union or participation agreement with the Fund or other writing providing for the payment of contributions, pays monies required therein to the Teamsters Industrial Employees Pension Fund for the purpose of having benefits provided by the Teamsters Industrial Employees Pension Fund, or some of said benefits provided to said bargaining unit employees.

(Id. at 4 (emphasis added)). "Employees" are defined as "Employees of an Employer, as defined in Section 4 hereinabove, employed in a bargaining unit under a Collective Bargaining Agreement with the Union and for whom the Employer pays required monies to the Teamsters Industrial Employees Pension Fund." (Id.)

Article I, Section 10, then defines "Employer Contributions":
The term "Employer Contributions" or "Employers' Contributions" means any and all payments made by or obligated any and all Employers to the Teamsters Industrial Employees Pension Fund, in accordance with or as required by any collective bargaining agreement, or other agreement or arrangement, between the Employer and the Union for the purposes set forth and expressed in Article II, Section 3 hereof, pursuant to a participation agreement, contribution reports, and as may be provided by the Trustees or in the Teamsters Industrial Employees Pension Fund. The Employer, as a function and consequence of having made any contributions to the Pension Fund, shall be and is deemed to have agreed to, and adopted, the terms, provisions, and obligations of this Third Restated Agreement and Declaration of Trust.

(Id. at 5 (emphasis added)).

         The Trust Indenture then states its essential purpose: "The Trust Fund shall be held for the exclusive purposes of providing benefits to participants in the Fund." (Id. at 7 (Article II). To effectuate this purpose, the Trustees shall have the following audit authority:

to audit Employer contribution records to determine compliance with contribution obligations, and recover expenses incurred in connection with the auditing and collection efforts thereof, including but not limited to, requiring payment of interest upon such delinquencies as established herein, to require the posting of security for payment of delinquencies or protect against future delinquencies, establishing penalties in the event of delinquencies, requiring payment of auditing fees, liquidated damages, arbitration fees and court costs, counsel fees, and other costs and expenses which were or would otherwise be incurred by the Fund in connection with the monitoring and collection of Employer contributions as the Trustees deem advisable ....

[Id. at 7-8 [emphasis added)).

         Article III governs "Employer Payments to the Teamsters Industrial Employees" Funds. Under this article, "Employers," such as Beacon, are required to make contributions to the Funds. (See Id. at 10 (Section 2)). Moreover, this article also endows the Trustees with the power to:

(1) "demand, collect, receive and hold Employer contributions" (Section 3);
(2) "require any Employer, when so required, to furnish to the Trustees such information and reports as the Trustees may require in the performance of their duties" and to provide the Trustee with a copy of their books and records (Section 4);
(3) "enforce against any Employer, and an Employer shall be bound by, all rules and regulations duly formulated and established by the Trustees, . . . ." (Section 5); and
(4) "to prescribe such forms as they deem necessary for the Employers to utilize in the making of contributions . . . ." (Section 6).

(Id. at 10-11). Article III, Section 10, also provides the Trustees with the ability to commence actions against Employers to recover contributions:

All suits, arbitrations, and proceedings to recover contributions or any other payments due to the Trustees or the Teamsters Industrial Employees Pension Fund, to recover Fund assets, or to enforce or protect other rights of the Fund, the Teamsters Industrial Employees Pension Fund may institute an action or arbitration in its name as such or in the names of the Trustees. The Trustees are empowered to designate one or more arbitrators to serve as arbitrators on claims of delinquencies brought by the Trustees against the Employer.

(Id. at 12).

         The parties dispute the relevance of Article X to this dispute. Article X of the Trust Indenture is titled "Claims and Individual Rights." (Id. at 27). Article X, Section 1 provides that "No Employer, or Union, shall have any right, title or interest in or to the Trust Fund or any part thereof." (Id.). Section 2 concerns the rights of employees, participants, or beneficiaries in the Funds.

         Article X, Section 3, is an Arbitration Clause:

Section 3. Arbitration Clause. Any and all disputes arising under this Agreement or arising under any of the Plans, rules and regulations of the Trustees, excluding deadlock disputes but including any dispute raised by any plan beneficiary, or any party claiming any rights under this Trust Agreement, may be submitted by either party to final and binding arbitration before the Board of Arbitration appointed in accordance with this Agreement. The Trustees may appoint a "standing" arbitrator to serve to hear and decide participant or beneficiary challenge to Trustee determination. If no "standing" arbitrator has been appointed, the arbitrator shall be appointed by and in accordance with the rules of the New Jersey State Board of Mediation. The arbitration proceeding shall be conducted under the rules of the N.J. State Board of Mediation. In such arbitrated dispute, each party to the dispute shall be responsible for its own fees and expenses in preparing and presenting its case, and the fees of the Arbitrator shall be equally split. In order for a disputed claim to be timely asserted, it must be submitted to arbitration within 180 calendar days from the date the aggrieved party received notice of the Trustee's adverse disposition of the claim, or from when the aggrieved party has reason to know or believe that the Trustees disposed of, or refused to act or further consider, the claim.

(Trust Indenture, Article 10, § 3).

         Six months after adopting the Trust Indenture, on October 30, 2014, the Trustees adopted resolutions providing "that any action by the Trustees to recover delinquent contributions owed to the [Pension or Welfare] Funds or to compel a payroll audit is subject to binding arbitration before" the Trustees' permanently designated arbitrators, either Gerard Restaino or Ira Cure. (Compl. ¶ 23). The resolution stated that the Trustees could submit to arbitration any disputes arising from "any contributing employer becoming delinquent in its contributions and/or audit amounts to the Fund, or should any dispute arise concerning the obligation to make contributions or to submit to a payroll audit." (Id. ¶ 24).

         C. This Action

         This action arose after the defendants conducted an audit of Beacon's contributions for the 2013 and 2014 calendar years. As a result of that audit, defendants assert that Beacon owes $49, 383.98 in delinquent contributions and interest (the "Contributions Claim"). (Compl. ¶¶ 27-28). Defendants also assert that Beacon improperly made contributions on behalf of employees who no longer qualified for Fund benefits. As a result, the Funds extended coverage to these ineligible employees, and paid medical benefits to those ineligible employees (the "Damages Claim"). (Id. ¶¶ 29-31). Initially, defendants asserted that the amount of those unwarranted payments owed by Beacon totaled $466, 284.25. (Id. ¶ 30). However, defendants subsequently increased their Damages Claim to $838, 692 (Id. ¶ 31).

         To recover on their claims, on July 22, 2019, defendants submitted a demand for arbitration to Arbitrator Restaino. (Id. ¶ 29). Beacon objects to the arbitration; it does not believe that defendants' claims for delinquent contributions and damages are arbitrable. (Id. ¶ 33).

         On October 18, 2019, Beacon filed a declaratory judgment complaint pursuant to the Declaratory Judgment Act, 28 U.S.C. §§ 2201-02 seeking the following relief:

i. a declaration that Beacon is not bound to submit to arbitration in accordance with the Trusts; or
ii. in the event the Court finds that Beacon is bound to arbitrate in accordance with the Trusts, a declaration that the Welfare Fund Trustees' Damages Claim is not within the scope of the agreement to arbitrate and an ...

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