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Jillian Mechanical Corporation v. United Service Workers

June 21, 2012


The opinion of the court was delivered by: Spatt, District Judge.


This case arises from a dispute involving an alleged failure to make timely and full contributions to an employee benefit plan administered by the United Service Workers Union Local 355 ("Local 355"), the International Union of Journeymen and Allied Trades ("IUJAT"), and the United Welfare Fund-Welfare and Security Division and Joint Apprenticeship Training Fund ("JATF") (collectively, the "Respondents"), on behalf of the employees of Jillian Mechanical Corporation ("Jillian"), a member of the Long Island and New York Mechanical Contractors Association ("the Association").

Presently before the Court is a motion to dismiss the complaint filed for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6) by the Respondents. For the reasons set forth below, this motion is granted.


The Respondents are employee benefit plans under the Employee Retirement Income Security Act ("ERISA"). Jillian is an employer under the National Labor Relations Act ("NLRA").

Local 355 and the Association are signatories to a series of collective bargaining agreements ("CBA"). On February 1, 2005, by an assumption agreement, Jillian relinquished its bargaining rights to the Association and agreed to be bound by the July 1, 2002 to June 30, 2005 Association Collective Bargaining Agreement (the " 2002 CBA"), and any and all successor CBAs and other agreements between the Association and Local 355. The assumption agreement states, in relevant part:

Agreement, effective this 1st day of February, 2005 by and Local 355, United Service Workers, International Union of Journeyman and Allied Trades, ("Union") Jillian Mechanical Corp. ("Employer"). WHEREAS, the parties hereto acknowledge that there are presently a Collective Bargaining Agreement between the Union and the Long Island and New York Mechanical Contractor's Association ("Association") dated for the period July 1, 2002 through to June 30, 2005. In addition, the Employer recognizes there are or will be certain amendments, extensions, and renewals to the Association Agreement (hereinafter referred to as the "Association Collective Bargaining Agreement") to be negotiated on behalf of the Employer by the Association. . . .

5. The Employer agrees that the Association shall, on behalf of the Employer, negotiate successor Collective Bargaining Agreements, amendments, renewals, and extensions of the Collective Bargaining Agreements and the Employer agrees to be bound by any and all amendments, renewals and/or extensions of the above referenced Association Collective Bargaining Agreements unless and until this Agreement is properly terminated by either the Employer or the Union in accordance with the renewal and/or Termination Provisions of the Association Collective Bargaining Agreement. (Exhibit A.)

One of the successor CBAs was the 2008 CBA, effective July 1, 2008 through June 30, 2011, signed by the Association and the Union (the "2008 CBA"). It begins as follows:

AGREEMENT, made this 1st day of July, 2008 by and between UNITED SERVICE WORKERS UNION, IUJAT, LOCAL 355, hereinafter referred as the "Union".and the LONG ISLAND AND NEW YORK MECHANICAL CONTRACTORS' ASSOCIATION, INC.. for and on behalf of those present and future members of the Association who individually authorized the Association to act as their bargaining agent, each of which is referred to as an "Employer." (Exhibit B.) Pursuant to Article 14 of the 2008 CBA, Jillian agreed to contribute $0.80 per hour to the JATF for each bargaining unit employee.

Article 8 of the 2008 CBA contains an arbitration clause requiring Jillian and Local 355 to submit to binding arbitration for all disputes arising from the agreement. It states in relevant part:

All disputes, complaints, controversies, claims and grievances arising between the Employer [Jillian] and the Union [Local 355], or any group of employees covered by this Agreement with respect to, concerning or growing out of the interpretation, operation, application, performance or claimed breach of any of the terms and conditions of this Agreement shall be adjusted in accordance with the following procedure. . . .

b) The parties designate Eugene Coughlin, J.J. Pierson, and Elliott Shriftman as permanent arbitrators to alternatively hear and decide every other grievance, beginning with Arbitrator Coughlin. The decision of the arbitrator shall be final and binding upon the parties and shall be full enforceable in law, or in equity and the parties expressly consent that an award may be enforced in the Supreme Court of New York, County of Queens or in any court with jurisdiction over the parties. (Exhibit B.)

In addition, Article 15(q) of the 2008 CBA indicates that Jillian is also bound by all of the terms and conditions contained in the JATF Trust Fund Agreement ("Trust Agreement") that created and governed the Respondent funds. (Exhibit C.) Under the terms of the Trust Agreement, is the following:

When the Fund undertakes proceedings to recover Employer contributions, there are administrati[ve] burdens, financial burdens, and reallocation of staff resources which are damages which are difficult to quantify. Thus, where the Fund institutes an action to recover Employer contributions, such Employer is liable for the following: (i) the unpaid contributions, (ii) legal rate of interest on the unpaid contributions, (iii) an amount equal to either (a) the legal rate of interest on the unpaid contributions, or (b) liquidated damages in the amount of 20% of the contributions due, (iv) reasonable attorney's fees and costs of the action, and (v) all costs of collection including but not limited to fees incurred for auditing in connection with determining delinquent status. (Exhibit C, ¶ 2.)

In April 2011, Jillian advised Local 355 that it had terminated its relationship with the Association, and, therefore, wanted to conduct direct negotiations with Local 355 for a successor agreement to the 2008 CBA. (Exhibit D.) However, these negotiations met an impasse and no further agreement was reached. On October 19, 2011, Local 355 disclaimed interest in representing Jillian's employees, effective August 1, 2011.

On December 27, 2011, the parties began a dispute over the correct amount of employee benefit contributions Jillian owed under the previous 2008 CBA. Originally, the Respondents sought to recover contributions owed from July 2008 through August 2011, but presently they only seek to recover contributions from July 2008 through June 2011. The Respondents allege that Jillian failed to remit proper contributions to JATF. As a result, the Respondents demanded binding arbitration pursuant to the 2008 CBA.

On January 3, 2012, Jillian commenced a Special Proceeding in New York State Supreme Court to stay arbitration pursuant to New York Civil Practice Law and Rules § 7503.

The Petition requested an order of the State Supreme Court to permanently stay and enjoin the Respondents from proceeding with and conducting an arbitration hearing. On January 4, 2012, the Respondents removed the proceedings to this Court. On February 1, 2012, the Respondents filed the present motion to dismiss for failure to state claim pursuant to Federal Rule of Civil Procedure 12(b)(6).


As a threshold matter, before considering the merits of the case, the Court must assess whether jurisdiction is proper. Jillian argues that federal jurisdiction under the Employee Retirement Income Security Act ("ERISA") statute, 29 U.S.C. ยง 1132(e)(1), is improper because the 2008 CBA at issue was "expressly nullified and declared void" by Jillian "prior to the demand for arbitration." (Petitioner Mem. of Law, at 3). However, the fact that the CBA is no longer valid and enforceable does not deprive this Court of jurisdiction to determine whether there was a valid agreement to arbitrate this particular dispute. The quarrel concerns alleged unpaid contributions that were incurred during the time period covered by the 2008 CBA. The fact that the agreement was expired when the demand was made and this suit was initiated does not affect this Court's jurisdiction. See Mason Tenders Dist. Council Welfare Fund v. ITRI Brick and Concrete, No. 96 Civ. 6754, 1997 WL 678164, at *4 n.4 (S.D.N.Y. Oct. 31, 1997) ("none of ...

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