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Bejjani v. Manhattan Sheraton Corporation

United States District Court, Second Circuit

June 27, 2013

JOSEPH BEJJANI, et al., Plaintiffs,


J. PAUL OETKEN, District Judge.

This case arises from a labor dispute at the St. Regis Hotel. Plaintiffs allege that their union violated its duty of fair representation and that their employer violated the terms of the collective bargaining agreement. Defendants have moved to dismiss pursuant to Rule 12(b)(6). For the reasons that follow, Defendants' motions are granted and this case is dismissed.

I. Background[1]

Plaintiffs are banquet servers employed by Defendant Manhattan Sheraton Corporation ("the Hotel") and represented by Defendant New York Hotel & Motel Trades Council, AFL-CIO ("the Union"). The Hotel and the Union (collectively, "Defendants") are parties to a multi-employer collective bargaining agreement negotiated by and between the Union and a hotel trade association; this agreement is commonly referred to as the Industry-Wide Agreement ("the IWA"). Plaintiffs are employed by the Hotel under the terms and conditions of the IWA.

On November 30, 2007, some of the plaintiffs in this case filed a civil complaint in this Court alleging a breach of the duty of fair representation ("DFR") by the Union and breach of the then-operative CBA by the Hotel ("the 2007 Action").[2] In the 2007 Action, the plaintiffs alleged, inter alia, that the Union and the Hotel had failed to abide by an arbitration decision requiring the payment to the plaintiffs of gratuities on the revenue generated from room rental and other fees associated with banquet events ("the Arbitration Award"). The plaintiffs also alleged the existence of an illegal "tip pool" that deprived them of millions of dollars of gratuity compensation.

During the pendency of the 2007 Action, the Union and the Hotel entered into several agreements regarding certain then-pending grievances brought by or on behalf of the Hotel's banquet servers. Those agreements were ultimately encompassed by an Omnibus Agreement, dated September 8, 2008, that, in part, made dismissal of the 2007 Action a condition precedent for the Hotel's obligations under those several obligations settled in 2008. Pursuant to Exhibit E of the Omnibus Agreement, the Hotel agreed to pay $47, 000 per banquet server "in full and complete satisfaction of any and all matters arising out of all outstanding banquet issues." Each plaintiff in the 2007 Action also executed a "Release of Claims, " that released the Hotel and the Union of "any and all claims, including, but not limited to, complaints, suits, charges, obligations, promises, agreements... of any nature whatsoever, in law or in equity, which Releasors now have or may have against the Hotel-Releasees or the Union-Releasees from the beginning of time to the date of this Agreement." The Release encompassed "all claims" that each plaintiff "asserted" or "could have... asserted." Each Releasor affirmed that he or she was "not relying on any promises, assurances, or commitments made to me by the Hotel or the Union, or their agents or representatives, other than as is expressly stated in the Grievance Adjustment Agreements." Plaintiffs all executed such a release between September 17 and September 23, 2008. The Omnibus Agreement also incorporated an arbitration clause providing that "[a]ny disputes regarding the interpretation or application of this Agreement shall be submitted to final and binding arbitration in accordance with the grievance and arbitration provisions of the IWA." On October 2, 2008, Judge Baer entered a consent order in the 2007 Action terminating the case and dismissing all claims.

Plaintiffs allege that the Omnibus Agreement was part of an overarching conspiracy by the Union and the Hotel to violate Plaintiffs' rights. These allegations hinge largely on the so-called "Adour Agreement." On January 11, 2008, before Plaintiffs entered into the Omnibus Agreement, the Union and the Hotel entered into an agreement related to Adour, a restaurant in the Hotel. In pertinent part, this Agreement provided that "[b]anquet or private functions scheduled through Adour and taking place in the space occupied by Adour at any time of the day and without regard to whether the Restaurant is open or closed to the general public shall be assigned to and serviced by the Adour staff at the time of the banquet or function."

Plaintiffs allege that the Adour Agreement extended the IWA "to effectively give the Hotel full banquet rights at its A La Carte' restaurant, while exempting it from banquet pay rates and other terms and conditions of employment for banquet personnel." Noting that the server pay rates authorized by the Adour Agreement are "much reduced" from those of banquets under the IWA, Plaintiffs allege that the Adour Agreement created "a de facto competitive second banquet department within the Hotel which effectively makes the plaintiffs secondary banquet servers." In sum, Plaintiffs allege that "[t]he purpose of the Adour Agreement is to undermine the Banquet Servers['] entitlement to gratuities and wages at the rate required by the IWA and the arbitration award by shifting banquet events to the restaurant[, ] where the service pay rates are much lower by consent of the Union [and] not subject to the wages and gratuity rates set forth in the IWA and the [Omnibus Agreement]."

Plaintiffs did not become aware of the Adour Agreement until August 1, 2012, well after the Omnibus Agreement. They allege that their lack of knowledge resulted from intentional acts of concealment by Defendants. Plaintiffs' attorney was present at the negotiations that produced the Omnibus Agreement, but neither he nor his clients learned of the Adour Agreement. Plaintiffs do not allege that the Union made any affirmative representations to them during the Omnibus Agreement negotiations concerning the allocation of work for banquet events at Adour.

Plaintiffs allege that, in furtherance of their conspiracy and with knowledge of the Adour Agreement, Defendants caused the following language to be included in the Omnibus Agreement: "The Union acknowledges that there are no other banquet grievances of which it has knowledge, or of which it should have knowledge, as of the date of the Omnibus Agreement." The Omnibus Agreement also provided that "[n]othing in this Omnibus Agreement... shall be interpreted to authorize the Hotel to reduce any benefits currently received by tipped banquet employees, except as set forth in the Omnibus Agreement or the attached Settlement Agreements." The Settlement Agreement, in turn, provided that "except as modified by the Banquet Settlements and this Omnibus Agreement, ... the work and pay practices of the Hotel's Banquet Department are consistent with the [IWA], decisions of the Office of the Impartial Chairman, and applicable law." Plaintiffs allege that, notwithstanding these provisions, the purposefully concealed Adour Agreement misled Plaintiffs as to what they were agreeing to settle in the Omnibus Agreement and materially impacted upon the value of that settlement. Plaintiffs allege "upon information and belief' that Defendants, "at the time the [Omnibus Agreement] was executed[, ] agreed that they would cooperate to intentionally undermine the agreement by taking actions to minimize the benefits that were provided to the Banquet Servers by the [Omnibus] Agreement." Plaintiffs further allege that "[t]he Adour Agreement, in particular, and its implementation materially diminishes the benefits of the [Omnibus] Agreement and undermines its purpose and intent."

If Plaintiffs had been aware of the Adour Agreement prior to executing the Omnibus Agreement, they would not have agreed to the terms of the Omnibus Agreement in the form in which it was executed. Plaintiffs add that "[t]he Adour Agreement was entered into and then actively implemented by the Hotel and the Union for the purpose of depriving the Banquet Servers of the benefits of the Arbitration Award, and [Omnibus] Agreement that implemented the Arbitration Award, in direct response to, and principally in retaliation for, [the 2007 Action]."

Plaintiffs allege that, after the Omnibus Agreement was concluded, Defendants, "working in concert, began to create and/or enhance practices unknown to plaintiffs, and to execute a plan to make the practices permanent in order to effectively erode plaintiffs' income and the benefits to which the Arbitration Award [at issue in the 2007 Action] and [Omnibus] Agreement entitled them." For instance, the Hotel "increasingly began to divert banquet events normally serviced by the banquet servers to Hotel rooms by removing beds and converting' the rooms into banquet rooms, " impliedly because "[t]he Hotel staff, Room Service servers, that services the Hotel rooms are compensated at a much lower rate." Each time Plaintiffs questioned the legal appropriateness of this practice, the Union allegedly conceded that it violated the IWA. As part of its conspiracy to undermine the Omnibus Agreement, the Union did not take any meaningful steps to address these violations. The Union also misrepresented to Plaintiffs that it had undertaken to obtain information about this practice from the Hotel; in fact, the Union never requested such information from the Hotel.

During a meeting held on February 29, 2012, Plaintiff Bejjani, a Union delegate, called attention to a two-day banquet meeting that had been held at the Hotel on December 5 and 6, 2011. Although the Union "conceded this practice violated the CBA, " it "refused to arbitrate the issue." Plaintiffs allege that "[t]he Hotel had declined to pay contractual compensation to banquet servers... on the grounds that it cannot charge the client twice, and that the client was already charged on the Hotel floors." At this meeting, Mr. Cedeno, a Union vice president and business agent, referenced a recent favorable arbitration decision that allegedly "sides with banquets against room service regarding service of banquet functions on the guest floors." Cedeno instructed the Hotel to arrange a meeting with the room service servers regarding the new arbitration decision, adding that the Hotel should employ banquet servers on hotel floors if the room servers could not reach a solution with the banquet servers. Plaintiffs allege that this instruction was a "sham" and "intentional cover for a practice that the Hotel and the Union had conspired to continue for the express purpose of undermining the [Omnibus] Agreement." At the end of this meeting, a follow-up meeting was scheduled for March 12, 2012, and Bejjani asked Cedeno for a copy this new arbitration. Cedeno sent the decision that afternoon.

The arbitration decision in question, dated April 19, 2011 and brought in regard to the London Hotel NYC, described the disputed practice in the following terms:

When the duplex, Rooms 506 and 508, and Sky were booked as meeting rooms or for banquet functions, the Hotel assigned the work to Banquets, but when these same rooms were booked as guest rooms in conjunction with a guest's function in that room or other rooms, the work was assigned to Room Service. The Hotel based its assignment on whether, on booking the room, the guest expressed an interest to sleep or stay in the room. In certain cases, when the guest's intention changed, the Hotel had, on occasion, changed the assignment accordingly.

The arbitrator, from the Office of the Impartial Chairperson, found and awarded that "the current practice of assigning the work in question should continue."

Plaintiffs also describe the diversion of their income to Adour and other Hotel outlets. At an April 28, 2011 meeting, before management arrived, Plaintiff Bejjani advised Cedeno of a dinner/dance having been booked in Adour for the following day. Bejjani added that the banquet housemen were setting up the function and that a large cocktail reception had taken place in Adour the prior evening. At that time, Cedeno did not inform Bejjani of the Adour Agreement. Then, at the February 29, 2012 meeting, Plaintiff Kahtane asked Cedeno about the situation in Adour. Again, Cedeno did not mention the Adour Agreement. Plaintiffs allege that the Adour issue was brought to management's attention on many occasion, but "at none of these occasions did management make mention of the Adour [A]greement." On May 14, 2012, Bejjani, joined by O'Connor, held an impromptu meeting with the Director of Banquet Services, Mr. Najemian.[3] Najemian confirmed that a meeting of 50-60 guests had taken place in Adour a few days earlier, followed by a cocktail reception for the same event. Najemian added that he had told the Director of Banquets, Merjian, that this was not right, and promised that it would never happen again. Najemian denied that many functions that used to be booked on the banquet floor are now booked in Adour. Moments after this meeting, Merjian told O'Connor not to bother seeing executives at the Hotel as they were all aware of this trend and intended to direct as much business as they could into Adour. Merjian did not mention the Adour Agreement. On June 13, 2012, O'Connor asked Cedeno about the Adour situation. Cedeno responded that Adour can do as it pleases because it is an independent contractor. The CBA does not grant concessionaires/independent contractors any special treatment.

Meanwhile, on March 9, 2012, Najemian had notified Bejjani that the meeting scheduled for March 12, 2012 had been rescheduled to March 21, 2012. On March 13, 2012, the Union cancelled the March 21, 2012 meeting, on the ground that Cedeno was being dispatched by the Union to Washington, D.C. on official Union business and it was unknown when Cedeno would return. Plaintiff alleges that "as echoes resounded at the Hotel that Cedeno had been back, delegate Morcos placed a few calls to Cedeno's cell phone[, but] [n]one of the calls were returned." On June 13, 2013, O'Connor encountered Cedeno at the Hotel, at which point Cedeno stated that Bejjani had misinterpreted the London Hotel NYC Decision.

On July 10, 2012, Plaintiffs' counsel wrote to the Union's General Counsel, Mr. Maroko, to express concern about the conversion of bedroom floors into banquet facilities, warn of a potential CBA violation, and urge the Union to oppose-rather than acquiesce in-the Hotel's violations. On July 13, 2012, a representative of the Union, Clarke, called Bejjani and a follow-up meeting was scheduled for August 1, 2012. Clarke stated that a Hotel manager had not been available before that date. On July 18, 2012, another representative of the Union, Tremonti, replied to the letter sent by Plaintiffs' counsel on July 10, 2012. In pertinent part, this reply stated as follows: "The Union is currently looking into this matter further and has sent requests for information to the Hotel. If your clients have any further questions or concerns, they can contact their business agent, Eddie Cedeno, or myself...." Plaintiffs allege that the Union nonetheless took no substantive action to investigate, since "it knew full well what was happening and supported the actions." On July 30, 2012, Bejjani sent a letter to Peter Ward, President of the Union, accusing the Union of "17 years of duplicity which culminated in our 2008 agreement" and insisting that "you are personally behind the events and the dramas aimed at our defeat at the Hotel because of the debt you owe the Hotel."

On August 1, 2012, Cedeno spelled out that Adour had a special agreement with the Union and divulged that the Agreement had existed since Adour opened. When asked why the Union had not disclosed this agreement in 2008, the year the Omnibus Agreement was signed, Cedeno responded that it was never questioned. At an August 9, 2012 meeting with the Union and Management, the Hotel asked Cedeno about Adour. Cedeno reversed his prior position regarding Adour, stating that Adour is separate because there is an agreement that was done for it. Plaintiffs allege that "[t]his statement was made to lift the restrictions normally imposed on A La Carte' restaurants vis-à-vis Banquets." At this meeting, Merjian stated that the Hotel had been using all of its outlets for banquet functions. O'Connor objected, but the Union acquiesced to the practice. Plaintiffs allege that the Union "thereby extend[ed] the implementation of the conspiracy to undermine the CBA and [Omnibus] Agreement."

The Union allegedly remains steadfast in its refusal to file an arbitration demand concerning the practice of using Hotel rooms for Banquet events and "generally the Hotel's practice of the diversion of banquet server income." It also refuses to meet and confer with the Banquet Servers in good faith to discuss the issue. Upon information and belief, Plaintiffs allege that the Union "wants this practice to continue and intensify so that its goal of undermining the benefits of the [Omnibus] Agreement is realized."

II. Standard of Review

To survive a motion to dismiss pursuant to Federal Rule 12(b)(6), a plaintiff must plead sufficient factual allegations "to state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim is facially plausible "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). In other words, the "[f]actual allegations must be enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555. The Court must accept as true all well-pleaded factual allegations in the complaint, and "draw [ ] all inferences in the plaintiffs favor." Allaire Corp. v. Okumus, 433 F.3d 248, 249-50 (2d Cir. 2006) (internal quotations omitted). That said, "the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable ...

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