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Rothchild v. Madison Square Garden

May 8, 2007


The opinion of the court was delivered by: Lewis A. Kaplan, District Judge.


Petitioner commenced this action in state court for an order compelling respondent Madison Square Garden, L.P. ("MSG") to arbitrate or to afford him a so-called "fair hearing" in connection with his discharge. Respondents removed and both seek dismissal. Petitioner seeks remand to the state court.


MSG entered into a collective bargaining agreement ("CBA") with the respondent union on October 1, 1995. It foreclosed MSG from terminating or disciplining post-probationary employees without just cause, afforded employees accused of misconduct an opportunity to insist upon a hearing prior to the imposition of discipline, established a grievance procedure, and afforded the union the right to demand arbitration of grievances that were not resolved through earlier steps in the procedure. The CBA, however, expired in 2003 and was not replaced by a new CBA until January 23, 2006. In October and November of 2005, negotiations between the union and MSG were at an impasse.

On October 1, 2005, petitioner, a long-time MSG employee, was given an investigative layoff. He was discharged on November 11, 2005. MSG rejected the union's demand for a fair hearing or arbitration on the ground that the expiration of the CBA had eliminated those rights.

MSG and the union executed a new CBA on January 23, 2006 covering the period June 1, 2003 through May 31, 2007.*fn1 The new CBA provided, in an addendum entitled "Side Letter 8," that despite this coverage period:

"[MSG] continues to reserve the right to refuse, on a case by case basis, to arbitrate any grievance based on facts which arose on and after June 1, 2003 up to the date of this letter, except that it shall not refuse to arbitrate [certain specific cases, not including petitioner's]."*fn2 Petitioner commenced this action on or about February 12, 2007.


I. Jurisdiction

The state court petition by which this action was commenced did not explicitly premise any claim for relief upon federal law. Indeed, it acknowledged that there was no CBA in effect at the relevant time.*fn3 Respondents nevertheless removed the case on the theory that petitioner had claimed in the state court that MSG and the union had breached the expired CBA.*fn4 They claimed federal jurisdiction under 28 U.S.C. § 1331 and Section 301 of the Labor Management Relations Act ("LMRA").*fn5 Petitioner argues that there was no basis for removal because there was no CBA and his claim for relief is based entirely on state law.

In Derrico v. Sheehan Emergency Hospital,*fn6 the Second Circuit held that there was no Section 301 jurisdiction over a claim that, "because the employer and employee continue their relationship according to the terms [of the expired CBA], their conduct gives rise to an implied contract of employment under state law," even where "the 'implied' term . . . is identical to its forebear from the CBA."*fn7 Derrico emphasized two points in drawing this conclusion. First, all parties agreed that the CBA had expired, and "[w]hen a complaint alleges a claim based on events occurring after the expiration of a collective bargaining agreement, . . . section 301 cannot provide a basis for jurisdiction."*fn8 Second, the plaintiff claimed that the implied contract existed between individual employees and the company, as opposed to the union and the company. Derrico noted that "we know of no case holding that a contract between an employer and an individual employee falls under section 301."*fn9

Here, as in Derrico, all parties agree that the relevant events occurred after the expiration of the CBA. The critical question is whether petitioner's state law implied contract claim alleges a contract between himself and MSG or between the union and MSG. Petitioner's papers are not a model of clarity, but a fair reading suggests that he pleads both claims.

Indications that petitioner pleads a claim based on an implied contract between petitioner and MSG are found in petitioner's characterization of the state law supporting his claim: "New York Courts have always held that when a contract expires, and an employee continues to render the same services for the employer without entering into a new contract, then it will be presumed that he or she is serving under a new contract having the same terms, provisions and restrictions that performed an essential part of the original contract."*fn10 Similarly, petitioner argues that "[w]hile the contract had expired between MSG and the union, the petitioner (and many other MSG employees) continued working for MSG with the expectations that a new contract would be reached that would maintain their salaries and protect their rights and benefits that flowed therefrom."*fn11 An argument based on the performance and expectations of individual employees purports to state a claim for an implied contract between employee and employer. Were this petitioner's only claim, Section 301 would not provide jurisdiction.

Petitioner appears, however, to assert also a claim that an implied contract arose between the union and MSG. Most notably, petitioner claimed in the papers filed in state court that "the contract that contained a fair hearing and arbitration clause . . . remained in effect despite the existence of a labor/management dispute."*fn12 Any such contract, of course, would have been between the union and MSG. Petitioner claims also that "[t]his action arises [in part] out of . . . the failure of the respondent [union] to request either a ...

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