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Neshgold Lp v. New York Hotel & Motel Trades Council, Afl-Cio

United States District Court, Second Circuit

September 19, 2013

NESHGOLD LP, d/b/a JFK Plaza Hotel, Petitioner,



Pending before the Court are competing motions to vacate (Dkt. #27), and to confirm (Dkt. #21), two labor arbitration awards. For the reasons set forth in the remainder of this Opinion, Petitioner's motion to vacate is denied and Respondent's motion to confirm is granted.


A. Petitioner's Acquisition of the Hotel

Petitioner Neshgold LP, d/b/a JFK Plaza Hotel ("Petitioner" or "Neshgold"), is the operator of a hotel located at 151-20 Baisley Boulevard, Jamaica, New York, 11434 (the "Hotel"). (Petition to Vacate at ¶ 2). The Hotel, under different management, entered Chapter 11 bankruptcy at the end of 2010, in the course of which a court-appointed trustee assumed operations. (Liability Award at 10). Petitioner received approval from the bankruptcy court to acquire the Hotel in March 2011. ( Id. ).

Respondent New York Hotel & Motel Trades Council, AFL-CIO ("Respondent" or "Union"), is a labor organization that represents the Hotel's employees. (Petition to Vacate at ¶ 3). Respondent had longstanding labor disputes with the Hotel's prior management, and agreed to support Petitioner Neshgold's acquisition of the Hotel subject to an agreement to resolve these outstanding disputes. (Liability Award at 10).

On March 28, 2011, the parties entered into a Memorandum of Agreement (the "MOA") outlining the concessions made by both sides to enable Petitioner to resume normal hotel operations. (Petition to Vacate at ¶ 6). As pertinent to the instant litigation, Petitioner agreed in the MOA to be bound by the Industry Wide Agreement (the "IWA"), the collective bargaining agreement that had been in place prior to Petitioner's acquisition of the Hotel. ( Id. ¶ 7; MOA at ¶ 1).[2] Among other things, the IWA required binding arbitration of "[a]ll complaints, disputes or grievances arising between the parties hereto involving questions or interpretation or application of any clause of this agreement, or any acts, conducts, or relations between the parties, directly or indirectly, " to be conducted before the Office of the Impartial Chairperson, a standing arbitration entity. (IWA at 20).

Specific provisions in the MOA addressed Petitioner's expressed intention of closing the Hotel for renovations. The parties agreed, for instance, that "the Hotel may close for renovations necessary to attain a chain flag[3] for a period not to exceed four (4) months, " and that "the [wage rate provided for elsewhere in the MOA would] be tolled for the shorter of the renovation period an employee is not actually working or three months." (Exh. A at ¶ 4). The MOA also provided that, "[o]ther than for accrued benefits... no wages nor Funds contributions are due for hours not worked by an Employee during the above renovation period." ( Id. ; see also Petition to Vacate at ¶ 9). Presumably in exchange for these Union concessions, Petitioner agreed elsewhere in the MOA that "[f]or its initial workforce, [Petitioner would] offer employment... to all Employees represented by [Respondent]... by seniority, for which the Hotel will have positions upon or after acquisition by Neshgold." (Exh. A at ¶ 3).

The Hotel closed for renovations on March 31, 2011. (Liability Award at 11). The ensuing renovations period proved challenging, due both to the disrepair of the property - including numerous active building violations - and multiple water-damage events. (Petition to Vacate at ¶¶ 11-12, 16-22). The Hotel did not resume operations until March 22, 2012, almost a year after its initial closure. ( Id. at ¶ 23).

B. The Arbitration

Respondent Union initiated an arbitration pursuant to the IWA in November 2011 (Petition to Vacate at ¶ 24), complaining that Petitioner had: (i) failed to reopen at the end of the four-month renovation period; (ii) failed to comply with the MOA recall procedures upon eventual reopening; and (iii) failed to make appropriate severance and benefits payments. ( Id. at ¶¶ 24-25; Liability Award at 12-19).

Petitioner argued in response that MOA paragraph 4 would only have compelled reopening within four months had the Hotel closed to obtain a chain flag. The Hotel's closure was not designed to acquire a chain flag, Petitioner maintained, but only to restore the Hotel to service condition. As such, the reopening provision never came into effect. In the alternative, Petitioner argued that, irrespective of the effect of the reopening provision, the intervening waterdamage events had made it legally impossible for the Hotel to reopen in that period. (Petition to Vacate at ¶ 27; Liability Award at 19-24).

The arbitrator held a liability hearing on October 22, 2012, and issued the Liability Award on December 18, 2012, holding for Respondent. In the Liability Award, the arbitrator concluded that "the purpose of the closing was to make renovations needed to obtain a chain flag and that, by the express terms of the MOA, the Hotel was obliged to reopen within four months from the date it closed for renovation." (Liability Award at 25). The arbitrator also rejected Petitioner's impossibility defense. ( Id. at 25-26). Finally, the arbitrator agreed that Petitioner had failed to recall former employees in accordance with the MOA. ( Id. at 26).

On February 14, 2013, the arbitrator conducted a hearing to determine damages. (Relief Award at 2). Respondent calculated damages by observing that Petitioner employed 17 individuals on its eventual reopening. With respect to its failure to reopen claim, Respondent sought back wages and benefit payments equal to the amount Petitioner would have paid had it reopened on schedule at the same staffing level. (Petition to Vacate at ¶ 36). With respect to its failure to recall claim, Respondent sought back wages and benefit payments equal to the payments actually made to those individuals who were employed by Petitioner after the Hotel reopened on March 21, 2012, but who were not recalled in accordance with the MOA. (Relief Award at 6; see also Petition to Vacate at ¶ 34). Respondent also sought appropriate severance payments for any employee who did not accept a recall offer (Relief Award at 4-7; Petition to Vacate at ¶ 33), and an additional 15% surcharge for Petitioner's allegedly willful violation of the MOA (Relief Award at 6-7).

Petitioner argued that Respondent's failure to identify specific employees who should have been recalled deprived the recall damages of the requisite evidentiary foundation. (Relief Award at 8-9). With respect to damages for failure to reopen, Petitioner submitted that any award would be impermissibly speculative; the Hotel's disrepair prevented Petitioner from employing anyone at all before the Hotel eventually reopened. ( Id. at 10-11).

The arbitrator issued the Relief Award on March 28, 2013, accepting Respondent's calculations for both categories of damages with minor modifications and ordering severance payments, but rejecting the 15% willfulness surcharge. (Relief Award at 14-17). The ...

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