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Brooklyn Downtown Hotel LLC v. New York Hotel And Motel Trades Council, Afl-Cio

United States District Court, S.D. New York

March 29, 2017


          OPINION & ORDER

          HONORABLE PAUL A. CROTTY, United States District Judge

         Plaintiffs seek a declaratory judgment against defendant the New York Hotel and Motel Trades Council, AFL-CIO (the “Hotel Workers Union”), that Plaintiffs are not bound by the provisions of a collective bargaining agreement-the Industry Wide Agreement (“IWA”)-and that the IWA is not enforceable as violative of the National Labor Relations Act (“NLRA”) and public policy (the “Contract Claims”). Plaintiffs also claim that the agreements, including the IWA, and actions of defendants the Hotel Workers Union and Interstate Hotels & Resorts, Inc. (“Interstate, ”[1] and together with the Hotel Workers Union, “Defendants”) violate the Sherman Act and the New York State Donnelly Act (the “Antitrust Claims”). Each Defendant submitted a motion to dismiss the Amended Complaint. The Court heard oral argument on the motions on February 1, 2017.

         For the reasons set forth below, the Court (1) grants Defendants' motions to dismiss with respect to the Antitrust Claims, and (2) denies the Hotel Workers Union's motion to dismiss with respect to the Contract Claims.


         I. Relevant Actors

         Plaintiffs are a web of 40 entities that own eight hotels in New York City and have plans to open four more in the near future. Am. Compl. ¶¶ 11-22. Plaintiffs' ultimate owners are “a combination of members of the Lam family or trusts whose beneficiaries are members of Lam family heirs and others.” Id. ¶ 24.

         Non-party Chelsea Grand LLC (“Chelsea”) owns the Four Points by Sheraton hotel located on West 25th Street in Manhattan (“Four Points Hotel”), and Chelsea, in turn, is owned by members of the Lam family, including John Lam. Id. ¶ 25 The Hotel Workers Union represents approximately 32, 000 hotel workers in New York City and elsewhere. Id. ¶ 26. It has contracts with more than 300 hotels, including hotels in each of New York City's five boroughs. Id.

         Interstate provides management services for hotels and manages approximately 450 hotels, and 83, 000 rooms worldwide. Id. ¶ 27.

         Non-party Hotel Association of New York City, Inc. (“HANYC”) is an association whose “members include more than 270 hotels in New York City, representing more than 75, 000 rooms and approximately 50, 000 hotel employees.” Id. ¶ 28.

         II. Relevant Facts

         The Contract Claims here begin with the prior decisions in Chelsea Grand, LLC v. New York Hotel & Motel Trades Council, AFL-CIO (“Chelsea I”). See 07 Civ. 2614 (PAC), 2014 WL 4813028 (S.D.N.Y. Sept. 29, 2014), aff'd 629 F. App'x 152 (2d Cir. 2015). At issue in Chelsea I was whether the Hotel Workers Union could organize Chelsea's Four Points Hotel based on agreements that the Hotel Workers Union had entered into with Interstate, Chelsea's managing agent. Chelsea argued that it had advised Interstate that it did not want to be unionized, but Chelsea was ultimately held to be bound to certain provisions of the IWA. The Court summarizes below relevant facts from the Amended Complaint as well as from the two decisions in Chelsea I.

         A. The IWA

         There are two provisions in the IWA-a collective bargaining agreement (renewed most relevantly in 2001, 2006, and 2012), between the Hotel Workers Union and HANYC-that are at the heart of the parties' dispute. See Chelsea I, 2014 WL 4813028, at *2; Am. Compl. ¶¶ 1, 31, 37. The first provision is a card check and neutrality clause, set forth in Article 60 and Addendum IV of the IWA (“CCN Clause”). Am. Compl. ¶ 31; Am Compl. Ex. 1 at 71, 111-15. The CCN Clause in the 2001 IWA obligates signatories that “acquire[] an ownership, management or control interest” in a hotel “to provide the Union access to employees, to permit the Union to organize employees through a card check process, and to remain neutral throughout the union organizing process.” See Am. Compl. Ex. 1 at 111; Am. Compl. ¶ 31; Chelsea I, 2014 WL 4813028, at *2.

         The second provision is an accretion clause (“Accretion Clause”). As set forth in the 2001 IWA, the Accretion Clause provides that IWA signatories

agree[] to the accretion of any and all hotel and concessionaire properties which come to be owned and/or managed in the New York City area to the bargaining unit(s) presently or hereafter covered by the Industry Wide Agreement or any successor collective bargaining agreement thereto, and that all of the terms and conditions set forth in the Industry Wide Agreement or its successor shall be immediately applicable to the accreted bargaining unit(s).

Am. Compl. Ex. 1 at 70-71; see Am. Compl. ¶ 33. In 2012, the IWA was renewed, and the Accretion Clause was modified to extend to “affiliated and related entities” of parties to the IWA. Am. Compl. ¶ 38; Am. Compl. Ex. 3 at 48.

         B. Chelsea I

         The Chelsea I action began after John Lam decided to pursue a new venture in the hotel industry. 2014 WL 4813028, at *3. Mr. Lam headed the Lam Group, a closely held family enterprise that owned Chelsea. Id. He sought a franchise agreement with Sheraton Hotels, and as a condition to obtaining a Sheraton franchise, Mr. Lam agreed to use Interstate as its managing agent. Id. In February 2003, Chelsea entered into a Hotel Management Agreement (the “HMA”) with Interstate for Interstate to be the managing agent of Chelsea's hotel. Id.

         In 2004, Interstate signed a memorandum of agreement with the Hotel Workers Union (“2004 MOA”). Chelsea I, 2014 WL 4813028, at *6. The 2004 MOA took retroactive effect on July 1, 2001 but had no expiration date. Id. at *6-7. In it, Interstate “agree[d] to be bound by the Accretion and Card Count/Neutrality provisions of the Memorandum of Understanding dated June 15, 2000 between the Union and the Hotel Association of New York Inc.”[3] Id. at *6. Chelsea has always contended that Interstate entered into the 2004 MOA without Chelsea's knowledge, and despite a provision in the HMA stating Chelsea's desire to remain non-union. See Am. Compl. ¶ 3.

         In early 2007, the Hotel Workers Union sought to organize the Four Points Hotel pursuant to the CCN Clause provided for in the 2004 MOA. Chelsea I, 629 F. App'x at 153. Chelsea resisted, and the Hotel Workers Union commenced an arbitration proceeding against Chelsea and Interstate before the Impartial Chairman (“IC”). Id. The IC issued two awards finding that Chelsea violated its obligations under the 2004 MOA and the substantive IWA provisions ...

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