United States District Court, D. New Jersey
BEACON SALES ACQUISITION, INC. D/B/A ARZEE SUPPLY CORPORATION, Plaintiff,
BOARD OF TRUSTEES OF THE TEAMSTERS INDUSTRIAL EMPLOYEES PENSION FUND; THE TEAMSTERS INDUSTRIAL EMPLOYEES PENSION FUND; BOARD OF TRUSTEES OF THE TEAMSTERS INDUSTRIAL EMPLOYEES WELFARE FUND; AND THE TEAMSTERS INDUSTRIAL EMPLOYEES WELFARE FUND, Defendants.
McNulty United States District Judge
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.
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.
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.
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.
reasons provided below, Beacon's motion (DE 3) will be
denied in part and granted in part.
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).
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).
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
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
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
(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."
Article I, Section 10, then defines "Employer
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)).
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
[Id. at 7-8 [emphasis added)).
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
(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
(Id. at 12).
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
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).
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. ¶
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).
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).
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 ...