The opinion of the court was delivered by: SPATT
In this dispute regarding the disbursement of settlement funds following a plant closing, the defendants White Rose Food, A Division of DiGiorgio Corporation ("White Rose") and the Furniture, Flour, Grocery, Teamsters, Chauffeurs & Warehousemen Union, Local No. 138 ("Local 138"), moved the Court for an order granting summary judgment in their favor and dismissing the complaint.
This written opinion follows an oral decision on the defendants' motions rendered on June 28, 1996.
This action was commenced against the defendant White Rose in New York Supreme Court, Kings County, by the plaintiffs, who are former employees of White Rose at its Farmingdale, L.I., grocery warehouse, in August, 1993. The plaintiffs were members of Local 138. The action arises from a Settlement Agreement between White Rose and Local 138, the plaintiff's bargaining agent, that followed a labor strike and closing of the Farmingdale warehouse. Under the Settlement Agreement, former employees could be placed on a preferential hiring list for other job sites and certain funds were to be disbursed to the plaintiffs or their pension fund. The amended complaint alleges that deductions were improperly made by White Rose prior to disbursing the funds, namely the employer's share of FICA, FUTA and SUI contributions.
The Settlement Agreement, executed in September, 1993, provides that White Rose will place $ 1,500,000.00 in an escrow account to be distributed to eligible former employees of the Farmingdale facility. The Settlement Agreement contained a binding arbitration clause and expressly states that it must be ratified by the eligible rank and file members of Local 138 who were former employees of White Rose.
Apparently "Joint Council 16," the entity that was to act as escrow agent and distributor of the settlement funds determined after the Settlement Agreement was approved, that it could not function in that capacity. Local 138 and White Rose entered into an "Amendment to Settlement Agreement," dated January 23, 1993 (the "Amendment"), that provided for payment directly from White Rose to the eligible employees, upon presentation of a list of those employees' names and a completed W-4 form for each of them. The Amendment also provided for White Rose to issue payroll checks, with all required taxes deducted, to those former employees who elected to receive settlement money. The Amendment further provided that White Rose's contribution for all payroll taxes would be deducted from the $ 1,500,000.00 settlement fund. Under the Amendment, the payroll checks were to be delivered to Local 138 for distribution to the individual former employees.
The Court notes that the Amendment does not contain the language regarding membership ratification that is found in the original Settlement Agreement. It is undisputed that the Amendment was not presented to the rank and file for ratification. The plaintiffs contend that the Settlement Agreement and the parties' collective bargaining agreement required that such membership ratification be obtained.
The plaintiffs' original complaint named only the employer White Rose as a defendant and alleged that White Rose (1) wrongfully entered into an amendment to the Settlement Agreement that was not ratified by the rank and file; and (2) wrongfully deducted the employer's share of payroll taxes from the $ 1,500,000.00 settlement funds. In October, 1993, White Rose removed the action to this Court on the basis of diversity jurisdiction and the presence of a federal question under the Labor-Management Relations Act, 29 U.S.C. § 185 (the "LMRA").
White Rose then moved for summary judgment on the theory that the NLRA and relevant case law required the plaintiffs' claims to be pursued through their bargaining representative, Local 138, in arbitration. On September 23, 1994, the Court granted White Rose's motion, reasoning that the plaintiffs lacked standing to compel White Rose to arbitrate their claim directly with the plaintiffs because the terms of the Settlement Agreement mandate that disputes will be submitted to arbitration, which is to be initiated by Local 138. At that time, the Court noted that the plaintiffs could only proceed against White Rose for a breach of the agreement under § 301 of the LMRA if they also sued Local 138 in a "hybrid suit" for breach of its duty of fair representation by refusing to pursue the plaintiffs' claims. The plaintiffs declined, and indeed expressly refused, to bring such a claim against the Union. The plaintiffs also refused to attempt resolution of their dispute through the contractual grievance/arbitration procedure by asking Local 138 to pursue their complaint, stating that such a request would be "futile."
The plaintiffs then brought a second reargument motion, and on May 12, 1995, the Court again revisited its prior decisions. At that time, the plaintiffs submitted a letter dated March 6, 1995 from Daniel Clifton, Esq., Counsel for Local No. 138 stating that "Local 138 does not believe that a breach of contract has occurred, and it has declined to take this case to arbitration. In an Order dated May 12, 1995, the Court vacated its decisions of September 23, 1994 and February 27, 1995 and granted leave to the plaintiffs to serve and file a third amended complaint based on Local 138's express denial of the plaintiffs' request to arbitrate the matter of the disputed employer payroll taxes.
The plaintiffs' third amended complaint alleges that White Rose violated the Internal Revenue Code and FICA statutes, as well as the Settlement Agreement, by deducting the employer contribution for payroll taxes from the settlement fund. As to Local 138, the amended complaint alleges that the union breached its duty of fair representation by (1) refusing in March, 1995 to take the plaintiffs' claims to arbitration; and (2) entering into the amendment to the Settlement Agreement in January, 1993 without presenting it to the rank and file for approval.
Both defendants move the Court for an order granting summary judgment in their favor dismissing the complaint.
A. The summary judgment standard
A court may grant summary judgment "only if the evidence, viewed in the light most favorable to the party opposing the motion, presents no genuine issue of material fact," Cable Science Corp. v. Rochdale Village, Inc., 920 F.2d 147, 151 (2d Cir. 1990), and the movant is entitled to judgment as a matter of law. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986); see also Fed. R. Civ. P. 56(c) (summary judgment standard). The Court must, however, resolve all ambiguities and draw all reasonable inferences in the light most favorable to the party opposing the motion. See Twin Laboratories, Inc. v. Weider Health & Fitness, 900 F.2d 566, 568 (2d Cir. 1990); Liscio v. Warren, 901 F.2d 274, 276 (2d Cir. 1990); Knight v. U.S. Fire Ins. Co., 804 F.2d 9, 11 (2d Cir. 1986), cert. denied, 480 U.S. 932, 94 L. Ed. 2d 762, 107 S. Ct. 1570 (1987).
According to the Second Circuit "summary judgment is a tool to winnow out from the trial calendar those cases whose facts predestine them to result in a directed verdict." United National Ins. Co. v. The Tunnel, Inc., 988 F.2d 351, 355 (2d Cir. 1993). Once a party moves for summary judgment, in order to avoid the granting of the motion, the non-movant must come forward with specific facts showing that a genuine issue for trial exists. See Western World Ins. Co. v. Stack Oil, Inc., 922 F.2d 118, 121 (2d Cir. 1990) (quoting Fed. R. Civ. P. 56(e)); see also National Union Fire Ins. Co. v. Turtur, 892 F.2d 199, 203 (2d Cir. 1989). A genuine issue of material fact exists if "a reasonable jury could return a verdict for the nonmoving party." Liberty Lobby, 477 U.S. at 248; see Converse v. General Motors Corp., 893 F.2d 513, 514 (2d Cir. 1990).
However, mere conclusory allegations, speculation or conjecture will not avail a party resisting summary judgment. See Western World, 922 F.2d at 121. If there is evidence in the record as to any material fact from which an inference could be drawn in favor of the non-movant, summary judgment is unavailable. See United National, 988 F.2d at 354-55; Rattner v. Netburn, 930 F.2d 204, 209 (2d Cir. 1991). Finally, the Court is charged with the function of "issue finding", not "issue resolution". Gallo v. Prudential Residential Services, Ltd, Partnership, 22 F.3d 1219, 1224 (2d Cir. 1994).
It is within this framework that the Court addresses the grounds for the present motions for summary judgment.
B. As to the claims for breach of duty of fair representation against Local 138
A claim for breach of the duty of fair representation ("DFR") is an allegation that the union treated its members arbitrarily, discriminatorily, or in bad faith or acted to seriously undermine the integrity of the arbitration process. Vaca v. Sipes, 386 U.S. 171, 17 L. Ed. 2d 842, 87 S. Ct. 903 (1967); Hines v. Anchor Motor Freight, Inc., 424 U.S. 554, 47 L. Ed. 2d 231, 96 S. Ct. 1048 (1976). The plaintiffs' cause of action for breach of duty of fair representation is comprised of two claims. The first is based on the union's execution of the Amendment to the Settlement Agreement, which is dated January 19, 1993 and appears to have come to the attention of the ...