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Trustees of Empire State Carpenters Annuity v. Syracuse Floor Sys., Inc.

United States District Court, E.D. New York

December 5, 2014

TRUSTEES OF EMPIRE STATE CARPENTERS ANNUITY, APPRENTICESHIP, LABOR-MANAGEMENT COOPERATION, PENSION, and WELFARE FUNDS, Plaintiffs,
v.
SYRACUSE FLOOR SYSTEMS, INC., SYRACUSE COMMERCIAL FLOOR, INC., and COMMERCIAL FLOOR SOLUTIONS, INC., Defendants

For Trustees of Empire State Carpenters Annuity, Apprenticeship, Labor-Management Cooperation, Pension and Welfare Funds, Plaintiff: Charles R. Virginia, LEAD ATTORNEY, Nathan V. Bishop, Virginia & Ambinder LLP, New York, NY.

For Syracuse Floor Systems, Inc., Defendant: Netanel Newberger, Milman Labuda Law Group PLLC, Lake Success, NY.

For Syracuse Commercial Floors, Inc., Defendant: Michael Davis Hoenig, LEAD ATTORNEY, Woods Oviatt Gilman LLP, Rochester, NY; Netanel Newberger, Milman Labuda Law Group PLLC, Lake Success, NY.

For Commercial Floor Solutions, Inc., Defendant: Robert Barnes Calihan, LEAD ATTORNEY, Calihan Law PLLC, Rochester, NY; Netanel Newberger, Milman Labuda Law Group PLLC, Lake Success, NY.

REPORT AND RECOMMENDATION

ARLENE R. LINDSAY, United States Magistrate Judge.

This is an action commenced by trustees of a group of employee benefit plans seeking to collect delinquent employer contributions. Before the Court, on referral from District Judge Sandra J. Feuerstein, is the motion by defendant Syracuse Floor Systems, Inc. (" Syracuse Floor") to dismiss the complaint pursuant to Federal Rule Civil Procedure (" Rule") 12(b)(6) and compel arbitration. For the reasons that follow, the undesigned respectfully recommends that the motion be denied.

BACKGROUND

I. The Complaint

Trustees of the Empire State Carpenters Annuity, Apprenticeship, Labor Management Cooperation, Pension and Welfare Funds (collectively, " Plaintiffs") commenced this action against defendants Syracuse Floor, Syracuse Commercial Floor, Inc. (" SCF") and Commercial Floor Solutions, Inc. (" CFS") (collectively, " Defendants") alleging violations of the Employee Retirement Income Security Act of 1974 (" ERISA"), as amended, 29 U.S.C. § § 1132(a)(3) and 1145, and § 301 of the Labor Management Relations Act of 1947, as amended, 29 U.S.C. § 185. Plaintiffs allege that the Defendant employers have not fulfilled their statutory and contractual obligations to pay required fringe benefit contributions to the plaintiff funds and have failed to submit to an audit. Compl. ¶ ¶ 14-15. Specifically, Plaintiffs allege that from January 2009 through the present, Syracuse Floor " has been a party to, or manifested an intention to be bound by, collective bargaining agreements (" CBAs") with the Northeast Regional Council of Carpenters f/k/a the Empire State Regional Council of Carpenters, " that the CBAs " require Syracuse Floor to make specified hourly contributions to the Funds, " and that " [a]s a result of work performed by Syracuse Floor, pursuant to the CBAs, there became due and owing to the Funds from Syracuse Floor benefit contributions." Id. ¶ ¶ 9-10, 36. The complaint further alleges that all three defendants constitute a single employer or are alter egos of each other and, therefore, SCF and CFS are bound by the collective bargaining agreement to which Syracuse Floor is a signatory. Id. ¶ 18. The Complaint seeks an order holding Defendants jointly and severally liable for unpaid contributions in amount to be determined by a court-ordered audit for the period January 2009 through the present. Id. ¶ ¶ 33, 40, 45.

II. The Prior Motion to Dismiss

In August 2013, defendants Syracuse Floor and CFS moved to dismiss the complaint pursuant to Rules 12(b)(1) and 12(b)(6). By Order dated February 20, 2014, Judge Feuerstein terminated the motions without prejudice to renew. DE 39. In addressing Syracuse Floor's argument that the complaint violated ERISA's " written instrument" requirement, Judge Feuerstein found as follows:

[W]hile the Court recognizes that a breach of contract claim merely requires an allegation that an agreement exists and, that during the discovery process, a defendant is entitled to a copy of the contract at issue, it would be a considerable waste of judicial resources to allow this case to proceed to discovery if, in fact, there is no written instrument as required by ERISA. For instance, none of the defendants would be liable to the trustees if no written agreement between plaintiffs and [Syracuse Floor] exists. . . . Consequently, plaintiffs are hereby directed to provide a copy of the CBA between plaintiffs and [Syracuse Floor] to the Court and defendants upon receipt of this Order.

Id. at 4-5. Accordingly, the motions to dismiss were terminated without prejudice to renew until after the Court received the alleged CBA between plaintiffs and Syracuse Floor. Id. at 5. The Court's review of the docket sheet in this case reveals that to date, Plaintiffs have failed to produce a copy of a CBA.

III. The Instant Motion

Syracuse Floor now moves to dismiss the complaint and compel Plaintiffs to submit their claims to arbitration. Although the motion is made pursuant to Rule 12(b)(6), Syracuse Floor submits the declaration of its President, Brian Prusik, in support of its motion.[1] DE 69. Mr. Prusik avers that, contrary to the allegations of the complaint, Syracuse Floor has never entered into any CBA with the Northeast Regional Council of Carpenters or the Empire State Regional Council of Carpenters. Id. ¶ 3. Instead, on or about February 2, 2000, Syracuse Floor entered into an agreement (the " International Agreement") with the United Brotherhood of Carpenters and Joiners of America (" UBCJA") with regard to the payment of annuity, pension and/or health and welfare contributions. DE 69 ¶ 4; DE 69-1. The International Agreement, which is attached as an exhibit to Mr. Prusik's Declaration, provides that " [p]ayment of annuity, pension and/or health and welfare contributions for an employee's work in each locality shall be made to such funds and in such amounts as are identified in the applicable collective bargaining agreement for that locality, provided that the designated fund is signatory to a UBCJA National Reciprocal Agreement." DE 69-1, Art. II. The International Agreement does not authorize the payment of contributions for the apprenticeship and labor-management cooperation funds. DE 69 ¶ 4; DE 69-1.

On or about July 1, 2007 and March 8, 2008, three of the five plaintiff funds -- the Annuity, Pension and Welfare funds (collectively, the " Funds") -- entered into International Reciprocal Agreements with UBCJA, which agreements are also attached to Mr. Prusik's Declaration.[2] DE 69-2; 69-3; 69-4. The Reciprocal Agreements recognize that many employees have contributions made to more than one signatory fund and, as a result, may lose benefits. DE 69-2; 69-3; 69-4. In an effort to provide continuity of coverage for such employees, the trustees of the signatory funds entered into Reciprocal Agreements pursuant to which employees who perform work in multiple jurisdictions may obtain full benefit coverage from a single " home" fund. DE 69-2; 69-3; 69-4. Each of the Reciprocal Agreements signed by the Funds contains an arbitration clause, which provides as follows:

Arbitration. Any dispute, controversy or claim arising out of or relating to the application of this Agreement between signatory Plans shall be settled by arbitration. Any signatory Plan which disagrees with the action taken by another Plan under this Agreement may request arbitration by filing a written notice with such Plan by certified mail with a copy to [UBCJA]. If the Trustees of the Plans involved cannot agree upon an arbitrator within thirty days, application shall be made to the American Arbitration Association for the selection of an arbitrator. The general expenses of the arbitration, if any, shall be borne equally by the parties to the arbitration.

DE 69-2, § 10; DE 69-3, § XI; DE 69-4, § XI.

Syracuse Floor concedes that it is not a signatory to any of the three Reciprocal Agreements. Nonetheless, Syracuse Floor asserts that the Funds are required to arbitrate their claims in this case because (1) the Funds' claims fall within the scope of the arbitration provision contained in the Reciprocal Agreements; (2) Syracuse Floor is a third-party beneficiary to the Reciprocal Agreements and therefore entitled to enforce their provisions; and (3) equitable estoppel compels arbitration in this case. Syracuse Floor also contends that the claims of the Trustees of the Empire State Carpenters Apprenticeship and Labor-Management Cooperation Funds should be dismissed because these funds did not enter into any collective bargaining agreement with Syracuse Floor or any Reciprocal Agreement with UBCJA and therefore lack standing to audit and collect contributions from Syracuse Floor.

DISCUSSION

I. Applicable Legal Standard

" When resolving a motion to compel arbitration, a court must first determine whether there is a valid agreement to arbitrate between the parties." Mineola Garden City Co., Ltd. Bank of Am., No. 13--CV--05615, 2014 WL 2930467, at *2 (E.D.N.Y. June 26, 2014) (citing 9 U.S.C. § 4). If the court finds that such an agreement exists, the court must then determine whether the dispute at issue falls within the scope of the arbitration clause. Id.; see also In re Am. Express Fin. Advisors Sec. Litig., 672 F.3d 113, 128 (2d Cir. 2011) (setting forth two-part test).

Here, there is no dispute about the existence of an arbitration clause in the Reciprocal Agreements between the Funds and UBCJA. There is a dispute, however, as to whether Syracuse Floor, a non-signatory, can compel arbitration. " Whether an entity is a party to the arbitration agreement also is included within the broader issue of whether the parties agreed to arbitrate." Smith/Enron Cogeneration Ltd. P'ship, Inc. v. Smith Cogeneration Int'l, 198 F.3d 88, 95 (2d Cir. 1999); see also Republic of Iraq v. BNP Paribas USA, 472 F.Appx. 11, 14 n.1 (2d Cir. 2012). Thus, the Court begins its analysis by examining whether the parties to the Reciprocal Agreements intended to provide Syracuse Floor with the right to invoke arbitration. See Republic of Iraq, 472 F.Appx. at 14.

II. Analysis

A. The Reciprocal Agreements do not Provide Syracuse Floor with the Right to Compel Arbitration

Syracuse Floor contends that as a nonsignatory to the Reciprocal Agreements, it is entitled to compel arbitration as a third-party beneficiary. Even assuming arguendo that Syracuse Floor is a third-party beneficiary with a right to enforce the Reciprocal Agreements, Syracuse Floor must nevertheless show by a preponderance of the evidence that the parties to the agreements intended to provide Syracuse Floor with the right to invoke arbitration. See id. (" It is well settled that a third party beneficiary is entitled only to those rights which the original parties to the contract intended the third party to have.") (internal quotations marks and citation omitted).

As noted above, the arbitration clause at issue provides that " [a]ny dispute, controversy or claim arising out of or relating to the application of this Agreement between signatory Plans shall be settled by arbitration. Any signatory Plan which disagrees with the action taken by another Plan under this Agreement may request arbitration by filing a written notice with such Plan by certified mail with a copy to [UBCJA]." DE 69-2, § 10; DE 69-3, § XI; DE 69-4, § XI. The provision plainly identifies " signatory Plans" as the only parties who can refer disputes to arbitration. See In re Complaint of Southwind Shipping Co., S.A., 709 F.Supp. 79, 82 (S.D.N.Y. 1989) (" Courts have consistently drawn a distinction between arbitration clauses specifically identifying the parties to which it applies, and a broader form of arbitration clause which does not restrict the parties."). Thus, even if the Reciprocal Agreements between the Funds and UBCJA could give rise to third-party claims involving employer contributions as Syracuse Floor suggests, " there is no evidentiary basis for concluding that the parties bound themselves to resolve such claims through arbitration." Republic of Iraq, 472 F.App'x at 14.

In arguing that the Reciprocal Agreements did not intend to limit arbitrability to disputes between signatory plans, Syracuse Floor relies on the following statement in the arbitration clause: " The general expenses of the arbitration, if any, shall be borne equally by the parties to the arbitration." (emphasis added). Syracuse Floor asserts that the use of the word " parties" as opposed to term " signatory plans" implies that other parties, such as employers, may arbitrate contribution issues based on the Reciprocal Agreements. The Court disagrees. This provision plainly concerns the allocation of the costs of the arbitration; it does not address which parties are bound to resolve disputes through arbitration.

In sum, the Court finds that no reading of the arbitration clause supports Syracuse Floor's claim that the parties to the Reciprocal Agreements intended to provide Syracuse Floor with the right to invoke arbitration.

B. The Remainder of Syracuse Floor's Motion Should be Denied

Alternatively, Syracuse Floor argues that it is entitled to compel arbitration under the doctrine of equitable estoppel. Under this doctrine, courts " have been willing to estop a signatory from avoiding arbitration with a nonsignatory when the issues the nonsignatory is seeking to resolve in arbitration are intertwined with the agreement that the estopped party has signed." Choctaw Generation Ltd. P'ship v. Am. Home Assur. Co., 271 F.3d 403, 406 (2d Cir. 2001) (internal quotation marks and citations omitted).

Here, Syracuse Floor argues that the Funds' claims are necessarily intertwined with the Reciprocal Agreements because the Funds' right to audit and collect contributions from Syracuse Floor stems solely from these agreements. In this regard, Syracuse Floor argues that it never entered into a CBA pursuant to which Syracuse Floor was required to make contributions to the Funds and, without the Reciprocal Agreements, the Funds have no basis upon which to assert the instant claims.

In response, Plaintiffs argue that the Reciprocal Agreements are wholly inapplicable and return once again to their argument that their claims are governed by a CBA. Plaintiffs note that the Complaint alleges a breach of a CBA, not a Reciprocal Agreement, and that for purposes of this Rule 12(b)(6) motion, the Court must accept Plaintiffs' allegations as true. Syracuse Floor's demand for arbitration thus relies on Reciprocal Agreements which do not appear to govern Plaintiffs' claims. The Court's own reading of the Reciprocal Agreements supports Plaintiffs' assertion that the agreements were intended to resolve contribution allocations between funds and do not govern the claims in this case. Accordingly, because the Court is unable to discern the connection to the Reciprocal Agreements which would be required to estop Plaintiffs from avoiding arbitration, the Court reports and recommends that Syracuse Floor's motion for an Order dismissing the complaint and compelling arbitration be denied.

Similarly, the Court recommends that Syracuse Floor's motion to dismiss the claims of the Apprenticeship and Labor Management Cooperation Funds be denied. This motion is premised solely upon Syracuse Floor's contention that these funds lack any basis to audit and collect contributions from Syracuse Floor because: (1) contrary to the allegations in the Complaint, there is no CBA governing their claims; and (2) these funds did not enter into any Reciprocal Agreements with UBCJA and are not covered by the International Agreement. Again, given the procedural posture of this case and the parties' conflicting claims as to which agreement, if any, controls, the Court recommends that this motion be denied.[3]

OBJECTIONS

A copy of this Report and Recommendation is being electronically served by the Court on all parties. Any objections to this Report and Recommendation must be electronically filed with the Clerk of the Court with a courtesy copy to the undersigned within 14 days. Failure to file objections within this period waives the right to appeal the District Court's Order. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72; Wagner & Wagner, LLP v. Atkinson, Haskins, Nellis, Brittingham, Gladd & Carwile, P.C., 596 F.3d 84, 92 (2d Cir. 2010); Beverly v. Walker, 118 F.3d 900, 902 (2d Cir. 1997); Savoie v. Merchant's Bank, 84 F.3d 52, 60 (2d Cir. 1996).


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