United States District Court, S.D. New York
April 27, 2004.
In the Matter of the Application of COAST TO COAST INSTALLATIONS, INC., Plaintiff, -against- IRON WORKERS LOCALS 40, 361 & 417 UNION SECURITY FUNDS and IRON WORKERS LOCAL 417, Defendants
The opinion of the court was delivered by: ROBERT SWEET, Senior District Judge
The respondents Iron Workers Locals 40, 361 and 417 Union Security
Funds (the "Funds") and Iron Workers Local 417 (the "Union")
(collectively, the "Respondents") have moved under Rule 56, Fed.R. Civ.
P., to dismiss the petition of petitioner Coast to Coast Installations,
Inc. ("Coast to Coast") to stay an arbitration. For the reasons set forth
below, the motion is granted.
The Funds and the Union requested arbitration on January 16, 2003,
relying upon a collective bargaining agreement signed on January 10, 2001
by Michael Kares, the president of Coast to Coast ("Kares"). By order to
show cause of February 11, 2003, issued in the Supreme Court of the State
of New York, County of New York, Coast to Coast obtained a stay of the
On February 20, 2003, the Funds and the Union removed the petition to
stay to this Court. Discovery proceedings were undertaken, the deposition
of Gary Gaydos, a business manager and financial secretary-treasurer of
the Union, was noticed by Coast to Coast on November 5, 2003, and
adjourned, and the instant motion was marked fully argued and submitted
on January 30, 2004. The Facts
The following facts are gleaned from the parties' Local
Rule 56.1 Statements and submissions and are undisputed except as noted below.
Coast to Coast is a New York corporation and has its principal place of
business at 250 Moonachie Road, Moonachie, New Jersey.
Kares is the owner and president of Coast to Coast. Coast to Coast is a
non-union employer that installs conveyors and racking systems.
The Funds, located at 451 Park Avenue South, New York, New York, are a
group of Taft-Hartley employee benefit funds governed by trust agreements
and operating under the laws of the United States, including, without
limitation, the Labor Management Relations Act ("LMRA") and the Employee
Retirement Income Security Act ("ERISA").
The Union is a labor organization representing workers governed by,
inter alia, the National Labor Relations Act ("NLRA"), LMRA and ERISA. In August 2000, a Project Labor Agreement ("PLA") was entered into
between The Gap, Inc. ("The Gap") as owner, Clayco. Construction Company,
Inc. ("Clayco") as contractor, and unions affiliated with the Dutchess
County Building Trades Council, including the Union, relating to the
construction of a store in Fishkill, New York, to be operated by Old
Navy, a subsidiary of The Gap (the "Fishkill Project").
On September 11, 2000, The Gap faxed the PLA to Coast to Coast. The PLA
had already been signed by other subcontractors working on the Fishkill
Project. The PLA provided that: (1) a composite work crew of union and
non-union workers would be used, and (2) the agreement was specific to
the particular job, that it applies as a "single project agreement" and
"not to any other work at any other site" and that the "terms and
conditions of this Agreement shall be extended to include all
Subcontractors" on the Project. The PLA stated further that where
"conflicts exist between various Local Collective Bargaining Agreements
and this Agreement, this Agreement shall prevail." The PLA was executed
by Gary Gaydos on behalf of the Union.
On September 14, 2000, Coast to Coast, as a subcontractor, faxed a
bid proposal for the installation of the storage system to the company
providing certain equipment for the Fishkill Project. The bid proposal
listed the Fishkill Project as non-union, but also confirmed that Coast to Coast would use a composite crew of
union and non-union workers on this specific project.
On November 21, 2000, Coast to Coast was awarded the contract for the
unloading, erecting and installing of all the storage systems in the
On January 10, 2001, after a tour of the job site, Kares attended a
breakfast meeting at a Fishkill-area Holiday Inn with the representatives
of all the involved unions to discuss how the work would be performed for
Coast to Coast's portion of the Fishkill Project. Representatives from
the operating engineers, the millwrights, the carpenters, and the Union
were present. Gaydos attended the meeting on behalf of the Union.
The parties discussed what work would be performed by which particular
union and agreed that the members of the mill-wrights and the iron
workers unions would both be responsible for the installation of the
racks which was the bulk of the project awarded to Coast to Coast. The
parties also discussed the start date for work, the work schedule, what
the expectations were of Coast to Coast and the various unions regarding
the number of union and non-union workers needed, and other work-related
At the January 10, 2001 meeting, Kares described Coast to Coast's
business and the fact that it was generally a non-union company and that it would be using non-union workers on the project. The
unions assured Kares that they did not object to Coast to Coast using
non-union workers and that they (the unions) had executed the PLA with
The Gap. Kares advised all parties in attendance, including the Union
representative Gary Gaydos, that since Coast to Coast was generally a
non-union company, the union agreements Coast to Coast would enter into
would only apply until the completion of the Fishkill Project.
Toward the end of the meeting, after the parties had agreed to the
ratio of non-union and union workers that Coast to Coast would use on the
project, Gaydos presented Kares with a booklet and told him that he
needed to sign it. In the belief that the agreement was site-specific,
Kares executed the collective bargaining agreement (the "CBA") Gaydos had
placed in front of him.
Kares was later informed, however, that the CBA was a general
jurisdictional agreement and not site-specific to the Fishkill Project.
He believes that the agreement discussed by the parties was therefore
switched by Gaydos and replaced with a jurisdictional agreement without
his knowledge or consent.
The CBA contained provisions relating to wages, benefits, craft
jurisdiction, territorial jurisdiction and an arbitration clause. Kares
on the same occasion also signed agreements with other unions. The
submissions do not establish whether or not those agreements were site-specific. A later agreement signed by
Coast to Coast on October 29, 2001 was site-specific.
Coast to Coast submitted reports to the Union covering the work
performed on the Fishkill Project ending in August 2001. The reports on
Union forms contained the following legend:
The contributions shall constitute acceptance and
adoption by the employer of the collective bargaining
agreements of the Iron Workers Local Numbers 40, 361
and 417. The employer further agrees to be bound by
the trust fund agreements of said local unions and
accepts all the terms and conditions and provisions
Coast to Coast submitted to an audit demanded by the Union and the
Funds. The audit dated November 27, 2002 showed $357,395.90 of additional
contributions owing to the Funds for Coast to Coast work performed within
the Union's jurisdictional area, and on January 13, 2003, the Union and
the Funds demanded that arbitration be commenced before the Impartial
Arbitrator, Eric J. Schmertz, a well known and highly regarded
Coast to Coast sent the Union a notice terminating the CBA on February
Kares as president of Rack-it Systems, 2050 Center Avenue, Fort Lee,
New Jersey, on November 7, 1996, had signed a collective bargaining
agreement with similar terms to the CBA. Rack-it Systems ceased
operations sometime in 2002. Kares has maintained that the CBA was not the agreement he had
discussed with Gaydos.
The Summary Judgment Standard
Summary judgment is granted only if there is no genuine issue of
material fact, and the moving party is entitled to judgment as a matter
of law. Fed.R.Civ.P. 56(c); see Celotex Corp. v. Catrett, 477 U.S. 317,
322-23 (1986); SCS Communications, Inc. v. Herrick Co., Inc., 350 F.3d 329,
338 (2d Cir. 2004); see generally 11 James Wm. Moore, et al., Moore's
Federal Practice ¶ 56.11 (3d ed. 1997 & Supp. 2004). The court will not
try issues of fact on a motion for summary judgment, but, rather, will
determine "whether the evidence presents a sufficient disagreement to
require submission to a jury or whether it is so one-sided that one party
must prevail as a matter of law." Anderson v. Liberty Lobby. Inc.,
477 U.S. 242, 251-52 (1986).
"The party seeking summary judgment bears the burden of establishing
that no genuine issue of material fact exists and that the undisputed
facts establish her right to judgment as a matter of law." Rodriguez v.
City of New York, 72 F.3d 1051, 1060-61 (2d Cir. 1995). In determining
whether a genuine issue of material fact exists, a court must resolve all
ambiguities and draw all reasonable inferences against the moving party.
Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587
(1986); Gibbs-Alfano v. Burton, 281 F.3d 12, 18 (2d Cir. 2002). Thus, "[s]ummary judgment may
be granted if, upon reviewing the evidence in the light most favorable to
the nonmovant, the court determines that there is no genuine issue of
material fact and that the movant is entitled to judgment as a matter of
law." Richardson v. Selsky, 5 F.3d 616, 621 (2d Cir. 1993).
A material fact is one that would "affect the outcome of the suit under
the governing law," and a dispute about a genuine issue of material fact
occurs if the evidence is such that "a reasonable jury could return a
verdict for the nonmoving party." Anderson, 477 U.S. at 248; see also
R.B. Ventures, Ltd. v. Shane, 112 F.3d 54, 57 (2d Cir. 1997).
The Respondents Must Establish An Agreement to Arbitrate
In order to compel arbitration, the Union and the Funds must establish
an agreement to arbitrate. See, e.g., Garten v. Kurth, 265 F.3d 136, 142
(2d Cir. 2001) ("[B]efore the court compels arbitration of a claim, the
court must find that a valid agreement to arbitrate exists."); Mehler v.
Terminix Int'l Co. L.P., 205 F.3d 44, 49 (2d Cir. 2000).
Here, the Union and the Funds rely upon the CBA signed by Kares on
January 10, 2001, which contains an appropriate arbitration clause. The
Respondents also rely on the language in the reports submitted by Coast to Coast, quoted above, the termination
notice, and Hetchkop v. Woodlawn at Grassmere, Inc., 116 F.3d 28, 34 (2d
Cir. 1997) (holding that "[a] party is bound by a contract it has signed
unless it can show special circumstances that relieve it of the
contractual obligation"). Coast to Coast has not challenged the existence
of an agreement to arbitrate but has asserted that the CBA differed from
the PLA, which was controlling, and failed to express the understanding
that the agreement would be site-specific. CBA was materially different
from the agreement that Kares had made clear he would execute. On this
basis, Coast to Coast claims that it is not bound by the CBA to jobs
other than the Fishkill Project, notwithstanding Kares' execution of the
Summary Judgment is Granted
Coast to Coast has first sought denial of summary judgment under
Rule 56(f), based upon the failure of the Union to agree to a date for
Courts have interpreted Rule 56(f) to provide that when a party facing
an adversary's motion for summary judgment reasonably advises the court
that it needs discovery to be able to present facts needed to defend the
motion, the court should defer decision of the motion until the party has
had the opportunity to take discovery and rebut the motion. Commercial
Cleaning Servs., L.L.C. v. Colin Serv. Systems. Inc., 271 F.3d 374, 386 (2d Cir. 2001)
(citing Meloff v. New York Life Ins. Co., 51 F.3d 372, 375 (2d Cir.
1995); Hellstrom v. United States Dep't of Veteran's Affairs, 201 F.3d 94,
97 (2d Cir. 2000)). The Second Circuit has established a four-part test
to determine whether an affidavit or declaration submitted pursuant to
Rule 56(f) is sufficient to warrant deferring a decision on a motion for
summary judgment. According to that test,
The affidavit or declaration must detail: (1) the
nature of the uncompleted discovery; (2) how the facts
sought are reasonably expected to create a genuine
issue of material fact; (3) what efforts the affiant
has made to obtain those facts; and (4) why those
efforts were unsuccessful. Paddington Partners v.
Bouchard, 34 F.3d 1132, 1138 (2d Cir. 1994); Hudson
River Sloop Clearwater. Inc. v. Dep't of the Navy,
891 F.2d 414, 422 (2d Cir. 1989). See also Demery v.
Extebank Deferred Comp., 216 F.3d 283, 286 (2d Cir.
2000) (discovery should be denied where the requested
discovery will not create a genuine dispute of
material fact); Contemporary Mission Inc. v. United
States Postal Serv., 648 F.2d 97, 102 (2d Cir. 1981)
("An opposing party's mere hope that further evidence
may develop prior to trial is an insufficient basis on
which to justify the denial of the motion.").
G-I Holdings, Inc. v. Baron & Budd, No. 01 Civ. 216 (RWS), 2002 WL
31251702, at *4 (S.D.N.Y. Oct. 8, 2002).
Coast to Coast has submitted an affidavit here addressing the requisite
factors outlined above and asserting that the deposition testimony of
Gaydos is critical to support Coast to Coast's defense of fraud in the
execution. Coast to Coast has not established, however, that any of the
information sought would create a genuine issue of material fact. Moreover, Coast to Coast
only requested the Court's assistance in securing the deposition of
Gaydos by letter application dated February 25, 2004, nearly a month
after the submission of this motion. In the absence of any application to
compel the deposition prior to the submission of the instant motion and
given the prolonged difficulty of counsel for both parties to find an
acceptable date prior to that time, a Rule 56(f) defense to the motion
for summary judgment is unavailing.
Coast to Coast also has sought to defeat summary judgment on the
grounds of fraud in the execution of the CBA, the same grounds alleged in
Hetchkop. "Fraud in the execution occurs where there is a
`misrepresentation as to the character or essential terms of a proposed
contract,' and a party signs without knowing or having a `reasonable
opportunity to know of its character or essential terms.'" Hetchkop, 116
F.3d at 31-32 (quoting Restatement (Second) of Contracts § 163 comment a
(1981) ("Restatement")). "Proof that a party secretly substituted one
type of document for another is evidence of fraud in the execution."
Hetchkop, 116 F.3d at 32 (citing Operating Engineers Pension Trust v.
Gilliam, 737 F.2d 1501, 1504 (9th Cir. 1984)). A fraud in the execution
defense may also apply to "the substitution of a document of the same
kind where the new document introduced important terms that were
materially different from those to which the party had agreed."
Hetchkop, 116 F.3d at 32 (citing Connors v. Fawn Mining Corp., 30 F.3d 483,
493 (3d Cir. 1994); Restatement § 163 illustration 2). There is no allegation here of a false statement as to the nature of
the proposed contract and no substantiated assertion that one agreement
was switched for another.*fn1 However, there have been allegations of
"`excusable ignorance of the contents of the writing signed,'" a showing
of which is required to prevail on a defense of fraud in the execution.
Hetchkop, 116 F.3d at 32 (quoting Agathos v. Starlite Motel, 977 F.2d 1500,
1505 (3d Cir. 1992) (internal quotation marks omitted)). Nonetheless,
even construing the facts in Coast to Coast's favor, the elements of
fraud in the execution have not been set forth.
An issue of fact has been presented as to whether Kares was
fraudulently induced to sign the CBA, Coast to Coast's remaining defense
to summary judgment. On the side of the Funds and the Union are the fact
of signature and the other agreements signed on January 10. On the side
of Coast to Coast are Kares' account of the conversations and events of
January 10, the terms of the PLA which governed the job, Coast to Coast's
reported status as a non-union employer, and the absence of any discussion concerning
the jurisdictional effect of the CBA.*fn2
Notwithstanding this factual dispute, however, it is well settled that,
[A] claim or defense of fraudulent inducement, when it
challenges generally the enforceability of a contract
containing an arbitration clause rather than
specifically the arbitration clause itself, may be
subject to arbitration. See Prima Paint Corp. v. Flood
& Conklin Mfg. Co., 388 U.S. 395, 403-04, 87 S.Ct. 1801,
18 L.Ed.2d 1270 (1967) ("[I]f the claim is fraud in
the inducement of the arbitration clause itself an
issue which goes to the `making' of the agreement to
arbitrate the federal court may proceed to
adjudicate it. But the statutory language [of the FAA]
does not permit the federal court to consider claims
of fraud in the inducement of the contract
generally."). This is true because "arbitration
clauses as a matter of federal law are `separable'
from the contracts in which they are embedded, and .
. . where no claim is made that fraud was directed to
the arbitration clause itself, a broad arbitration
clause will be held to encompass arbitration of the
claim that the contract itself was induced by fraud."
Id. at 402, 87 S.Ct. 1801.
ACE Capital Re Overseas Ltd. v. Central United Life Ins. Co., 307 F.3d 24
29 (2d Cir. 2002); see also Campaniello Imports. Ltd. v. Saporiti Italia
S.D.A., 117 F.3d 655
, 666-68 (2d Cir. 1997). Put somewhat differently, an
allegation of fraud in the inducement is a defense that "renders
contracts voidable, but not void. And, under Prima Paint, a party is not
entitled to a trial on the arbitrability of a voidable contract unless the party alleges that the
arbitration clause itself is voidable and provides some evidence in
support of its allegation." Sphere Drake Ins. Ltd. v. Clarendon Nat'l
Ins. Co., 263 F.3d 26
, 31-32 (2d Cir. 2001) (internal citation omitted).
There is no claim by Coast to Coast of any misrepresentation or fraud
related to the arbitration clause of the CBA itself, and no allegation
that fraud was "an issue which goes to the `making' of the agreement to
arbitrate." Prima Paint Corp. v. Flood & Conklin Mgf. Co., 388 U.S. 395,
403-04 (1967); see also ACE Capital Re Overseas, 307 F.3d at 30
("Moreover, ACE has never contended that CUL's alleged fraud was directed
specifically to the arbitration clause, but instead has argued that the
entire Agreement was fraudulently induced. Thus, ACE's claim of
fraudulent inducement is not on its face precluded from arbitration.")
The claim of Coast to Coast is that the CBA failed to express the
agreement of the parties that it would be site-specific.
According to the arbitration provision contained in the CBA,
Any dispute as to the proper interpretation,
application or breach of this Agreement shall be
handled in the first instance by a representative of
the Union and the Employer and if they fail to reach a
settlement within five (5) days, such dispute should
be referred to the Joint Trade Arbitration Board for
decision. This clause is of sufficient scope "to encompass . . . claims of fraud in
the inducement and there is no evidence of an intent to withhold such
issues from the arbitrators and reserve them for judicial resolution,"
Sigety v. Axelrod, 535 F. Supp. 1169, 1172 (S.D.N.Y. 1982), particularly
when read in light of the strong presumption in favor of arbitrability.
See Hartford Accident & Indemnity Co. v. Swiss Reinsurance America
Corp., 246 F.3d 219, 226 (2d Cir. 2001). Accordingly, there is no further
requirement to stay the arbitration and Coast to Coast's claims may be
presented to the arbitrator.
The motion of the Respondents for summary judgment dismissing the
petition for a stay is granted.
It is so ordered.