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Trustees of New York City District Council of Carpenters Pension Fund v. Port Parties, Ltd.

United States District Court, S.D. New York

July 31, 2017

TRUSTEES OF THE NEW YORK CITY DISTRICT COUNCIL OF CARPENTERS PENSION FUND, WELFARE FUND, ANNUITY FUND, and APPRENTICESHIP, JOURNEYMAN RETRAINING, EDUCATIONAL AND INDUSTRY FUND, TRUSTEES OF THE NEW YORK CITY CARPENTERS RELIEF AND CHARITY FUND, THE NEW YORK CITY AND VICINITY CARPENTERS LABOR-MANAGEMENT CORPORATION, and THE NEW YORK CITY DISTRICT COUNCIL OF CARPENTERS, Petitioners,
v.
PORT PARTIES, LTD., Respondent.

          OPINION AND ORDER

          KATHERINE POLK FAILLA, District Judge

         This Opinion considers two very different narratives about a single labor arbitration. Petitioners New York City District Council of Carpenters (the “Union”) and several associated benefit funds (the “Funds, ” and together with the Union, “Petitioners”)[1] seek to enforce a March 24, 2016 arbitration award (the “Default Award”) against Respondent Port Parties, Ltd. (“Port Parties”). By Petitioners' account, this should be a straightforward proceeding. Port Parties's collective bargaining agreement with the Union (the “CBA”) required Port Parties to make periodic contributions to the Funds. When Port Parties failed to do so, the Funds demanded that Port Parties submit to arbitration. And when Port Parties did not attend the parties' arbitration hearing (the “Arbitration Hearing”), Arbitrator Roger Maher entered the Default Award in the Funds' favor. Petitioners now seek to confirm the Default Award under § 301 of the Taft-Hartley Labor Management Relations Act of 1947, 29 U.S.C. § 185 (the “LMRA”), and to recover the attorney's fees and costs they have incurred in litigating this action. Port Parties, in contrast, urges the Court to vacate the Default Award. Port Parties concedes that it did not attend the Arbitration Hearing - but only because Petitioners agreed to adjourn it. Despite that agreement, Port Parties claims, Petitioners went to the Arbitration Hearing and failed to tell Arbitrator Maher that Port Parties would not be joining. As a result of Petitioners' subterfuge, Port Parties was unable to identify for Arbitrator Maher the flaws in Petitioners' damages calculations. Thus, Port Parties contends, the Default Award is both fundamentally flawed and the product of Petitioners' fraud.

         At bottom, Port Parties's account of this case is based on a series of misunderstandings. There was no subterfuge here: Petitioners never agreed to adjourn the Arbitration Hearing, because Port Parties never requested an adjournment of it. And because Port Parties's other attacks on the Default Award are unavailing, it falls short of the high bar the LMRA imposes on a party seeking to vacate a labor arbitration award. Thus, the Court grants Petitioners' petition to confirm the Default Award, denies Port Parties's cross-petition to vacate it, and grants Petitioners' application for fees and costs.

         BACKGROUND[2]

         The crux of this case is a fact-intensive question: Why did Port Parties think that the Arbitration Hearing had been adjourned? A key to answering this question is that the Arbitration Hearing was one of three similar arbitration proceedings that occurred in 2016. There was one arbitration between Port Parties and the Union; this arbitration was adjourned at Port Parties's request. There was another arbitration between the Funds and Showtime on the Piers LLC (“Showtime”), an entity that shares an address and an owner, Charles Newman, with Port Parties. This second arbitration resulted in a default award against Showtime, and Petitioners are currently seeking to confirm that default award in another proceeding in this District. See Docket, Trs. of the N.Y.C. Dist. Council of Carpenters Pension Fund, Welfare Fund, Annuity Fund, & Apprenticeship, Journeyman Retraining, Educational & Industry Fund v. Showtime on the Piers, LLC, No. 16 Civ. 4788 (RA) (S.D.N.Y.). And finally, there was an arbitration between the Funds and Port Parties, which resulted in the Default Award that Petitioners seek to confirm here. An account of the relationships between the parties to these three arbitrations, and of how these arbitrations unfolded, follows.

         A. Factual Background

         1. The Union, the Funds, Port Parties, and Showtime

         “The Union is a labor organization that represents employees in an industry affecting commerce within the meaning of [§] 501 of the LMRA, 29 U.S.C. § 142.” (Pet'r 56.1 ¶ 7). The Funds consist of, inter alia, retirement and charity funds organized under the Employee Retirement Income Security Act of 1974 (“ERISA”) and the Internal Revenue Code, respectively. (Id. at ¶¶ 1, 4).

         Port Parties ceased operating “in or around December 2014”; it formerly “operat[ed] trade shows and related functions at various locations in Manhattan.” (Resp't 56.1 ¶¶ 39, 41). Newman was Port Parties's President. (Id. at ¶ 38). Newman is also the President of Showtime, an entity that shares a mailing address with Port Parties. (Id. at ¶ 77; Virginia Decl., Ex. 15, at 5).

         2. The CBA Between the Union and Port Parties

         In 2010, the Union and Port Parties executed the CBA. (CBA 45).[3] Port Parties subsequently executed “an [I]nterim [C]ompliance [A]greement … which extended the CBA's terms … through the time period relevant to the underlying arbitration.” (Pet'r 56.1 ¶ 11).

         The CBA set conditions for “wages, hours, and working conditions for” Union members performing work for Port Parties. (See CBA Art. I). Three aspects of the CBA deserve close attention here: (i) its geographic scope, (ii) its terms concerning Port Parties's obligation to make benefit contributions to the Funds, and (iii) its arbitration provision.

         First, by its terms, the CBA “cover[ed] work performed by [Union] employees” across, inter alia, “[a]ll of the five [ ] Boroughs of the City of New York.” (CBA Art. VIII, § 1). Port Parties, however, contends that the CBA's reach was in fact narrower: Among other things, Port Parties argues that the CBA did not cover “work completed at the New York Passenger Ship Terminal.” (Resp't 56.1 ¶ 12). Instead, Port Parties claims, work at this location was governed by a different collective bargaining agreement, one between Port Parties and Local Union No. 1909, International Longshoreman's Association, AFL-CIO (the “Longshoreman's Union”). (Id. at ¶ 30; see Brennan Decl., Ex. D, at 1).

         Second, the CBA obligated Port Parties to “make contributions” to the Funds “for each hour worked of all employees covered by [the CBA] and employed by [Port Parties] within the territory” the CBA covered. (CBA Art. VX, § 1). To ensure that Port Parties complied with this obligation, the CBA required Port Parties “to furnish its books and payroll records for an audit” “upon demand of the” Funds. (Pet'r 56.1 ¶ 13; CBA Art. XV, § 2).

         Finally, the CBA contained a broad arbitration clause. The CBA required Port Parties and the Union to “first attempt to settle and adjust” any “complaints, disputes, [or] differences” arising under the CBA, except for “the merits of [a] jurisdictional dispute, i.e., a dispute with another trade over the assignment of work.” (CBA Art. XII, § 1). “Any grievance not resolved” was required to “be submitted to arbitration before” one of three arbitrators, including Arbitrator Maher. (Id. at § 2). The CBA further manifested “the intent of” Port Parties and the Union “that all disputes between them, both within and outside of the [CBA], [would] be submitted to arbitration.” (Id. at § 3). And the CBA contained an important proviso about the logistics of initiating such an arbitration:

Service of any documents or notice referred to [in the CBA's Article concerning arbitration], or service of any notice required by law in connection with arbitration proceedings may be made by registered or certified mail. A post office receipt shall be conclusive evidence of proper service if mailed to the address designated by [Port Parties] when it signed the [CBA]. If certified or registered mail is refused or not picked up ordinary mail shall be deemed sufficient service provided that it is forwarded to the address of record contained in [the CBA].

(Id.). The CBA also provided that if either party to the CBA successfully confirmed an arbitration award, that party would be “entitled to receive all court costs in [that] proceeding as well as reasonable attorney's fees.” (Id.).

         3. The Audit and the Funds' Arbitration Demand

         “Pursuant to the CBA …, the Funds conducted an audit of [Port Parties's] books and payroll records.” (Pet'r 56.1 ¶ 19). The record does not disclose clearly the date on which the audit concluded, but it is undisputed that the audit reviewed Port Parties's contributions to the Funds for the time period between March 17, 2010, and December 31, 2014. (See Resp't 56.1 ¶ 23).

         This audit - which Petitioners claim resulted in a finding that Port Parties under-contributed to the Funds throughout the audit period - was the subject of a prior lawsuit between Petitioners, Port Parties, and Showtime. (Newman Aff. ¶ 3); see Docket, Trs. of the N.Y.C. Dist. Council of Carpenters Pension Fund, Welfare Fund, Annuity Fund, & Apprenticeship, Journeyman Retraining, Educational & Industry Fund v. Port Parties, Ltd., No. 15 Civ. 5408 (KBF) (S.D.N.Y.). On October 13, 2015, Petitioners, Port Parties, and Showtime executed a Tolling Agreement, pursuant to which Petitioners agreed to discontinue this earlier federal action in exchange for Newman opening Port Parties's and Showtime's books “to allow for the audit process to be completed.” (Brennan Decl., Ex. F, ¶¶ 1-6). The parties to the Tolling Agreement further agreed to toll the statute of limitations for any claim the Funds might have against Port Parties and Showtime “for recovery of delinquent fringe benefit contributions.” (Id. at ¶ 8).

         Once it was fully completed, Petitioners' audit revealed that Port Parties had “failed to remit contributions” to the Funds “in the principal amount of $463, 041.48.” (Pet'r 56.1 ¶ 23). All told, Petitioners concluded that Port Parties owed them $647, 387.03, a figure that included, inter alia, interest and liquidated damages. (Sgroi Decl. ¶ 12). Port Parties retorts that this figure “is erroneous and inflated” for three reasons: (i) it “includes work completed by employees for which the [ ] Union was not the appropriate bargaining unit”; (ii) “the audit … failed to credit [Port Parties] with $138, 169.10[ ] in applied funds that are being held by the Funds”; and (iii) the audit “erroneously included hours for supervisors who are not covered by the CBA.” (Resp't 56.1 ¶ 23).

         With the audit results in hand, the Funds commenced an arbitration against Port Parties. (Pet'r 56.1 ¶ 32). On January 28, 2016, the Funds sent, by regular and certified mail, a Notice of Intention to Arbitrate to Arbitrator Maher and Port Parties. (Brennan Decl., Ex. B). The caption of that notice identified Petitioners (i.e., the Funds and the Union) as the parties seeking an arbitration against Port Parties. (Id. at 2). But the letter enclosing the notice made plain that “the Funds” had initiated the arbitration in order to resolve “the dispute between [Port Parties] and the Funds regarding the outstanding audit deficiency.” (Id. at 1). And the Notice of Intention to Arbitrate stated that the “controversy” to be arbitrated was: “Delinquent fringe benefit contributions due to the Funds for the period: 03/17/2010 [to] 12/31/2014 in the amount of $650, 395.23.” (Id. at 3).

         The certified mail receipt for the Notice of Intention to Arbitrate that the Funds sent to Port Parties indicates that it was delivered on February 1, 2016, and signed for by “Security.” (Brennan Decl., Ex. B, at 4-5). The address to which the Funds mailed the notice - 71112th Avenue, New York, New York 10019 - is listed as Port Parties's address on the CBA, the Interim Compliance Agreement that extended the CBA, and the New York Department of State's website. (CBA 1; Davidian Decl., Ex. 2, at 2; Virginia Decl., Ex. 14).

         Port Parties, however, claims that it “never received the purported Notice of Intent[ion] to Arbitrate from Petitioners.” (Resp't 56.1 ¶ 54). Port Parties explains that it “has never employed any of the security guards stationed at the New York Passenger Ship Terminal, ” which the Court infers is located at 71112th Avenue. (Id. at ¶ 57). These security guards “are not agents of Port Parties and are not authorized to accept service of process or legal documents on behalf of Port Parties.” (Id. at ¶ 58).

         On January 31, 2016, Arbitrator Maher issued a Notice of Hearing scheduling the arbitration between the Funds and Port Parties. (Virginia Decl., Ex. 15, at 4). The Notice of Hearing set the arbitration for March 23, 2016, at 11:30 a.m., and identified the “Issue” to be arbitrated as “Fringe Benefits for” the “Delinquency Period” of “3/17/2010 through 12/31/2014, ” in the total amount of “$650, 395.23.” (Id.). Arbitrator Maher sent the Notice of Hearing to Port Parties by regular and certified mail, to the same 12th Avenue address to which the Funds had mailed their Notice of Intention to Arbitrate. (Id. at 1-2). And like the certified mail receipt for the Funds' Notice of Intention to Arbitrate, the receipt for the Notice of Hearing stated that it was signed for by “Security” on February 9, 2016. (Id. at 2). Port Parties claims that it never received Arbitrator Maher's Notice of Hearing. (Resp't 56.1 ¶ 56).

         Arbitrator Maher mailed another Notice of Hearing on January 31, 2016; this notice scheduled an arbitration between the Funds and Showtime. (Virginia Decl., Ex. 15, at 3). There are few details about this arbitration in the record of this case. But the Notice of Hearing for that arbitration provided that, like the Funds' arbitration with Port Parties, the Funds' arbitration with Showtime concerned delinquent fringe benefit contributions. (Id.). Arbitrator Maher scheduled the Funds/Showtime arbitration hearing for March 23, 2016, at 11:00 a.m. - thirty minutes before the Funds' arbitration hearing with Port Parties. (Id.).

         4. Port Parties's Union Arbitration Adjournment Requests

         Thus far, the Court has addressed two of the three arbitrations involving the parties to this case and entities related to them. As noted, Arbitrator Maher scheduled one of these arbitrations (between the Funds and Showtime) for March 23, 2016, at 11:00 a.m. And he scheduled another arbitration (between the Funds and Port Parties) for that same day at 11:30 a.m. In this section, the Court addresses the third arbitration - which was between the Union and Port Parties - and Port Parties's request to adjourn it.

         “Between 2014 and 2015, the [ ] Union received five grievances filed against Port Parties.” (Liang Decl. ¶ 4). On January 22, 2016, Paul Tyznar, the Union's Grievance Committee Chair, mailed a “Demand for Arbitration and Notice of Hearing” to Port Parties at the 12th Avenue address. (Id., Ex. 17, at 2-3). That document was printed on Union letterhead, listed the file numbers assigned to each of the five grievances, and stated that the arbitration between the Union and Port Parties concerning those grievances would be held on March 14, 2016, at 11:00 a.m. (Id.).

         On February 22, 2016, Jenny Liang - a paralegal for the Union - emailed Newman at his “Port Parties” and “Showtime” e-mail addresses. (Union Arbitration E-mails 4). Liang wrote: “As a friendly reminder, we have an arbitration hearing scheduled for March 14, 2016 at 11:00 AM between the [Union] and Port Parties.” (Id. (emphasis in original)). The e-mail then listed the file numbers for the five grievances scheduled to be addressed at the arbitration. (Id.).

         Newman responded to Liang's e-mail on February 26, 2016: “We need to [postpone] these arbitrations as well as any others until we have time to meet and discuss the open issues - we don't want to default on any of these.” (Union Arbitration E-mails 2-3). Copied on Newman's e-mail were Tyznar, Scott Danielson, Patrick Kennedy, Jeremy Milin and Matthew Walker - all of whom, Port Parties claims, work for Petitioners (not just the Union). (Resp't 56.1 ¶ 61). Thus, Port Parties contends, after receiving Newman's February 26 e-mail, these “representatives of [ ] Petitioners possessed actual and/or constructive knowledge of [ ] Port Parties's specific and expressed desire to adjourn all respective arbitrations between Port Parties and Petitioners.” (Newman Aff. ¶ 39).

         Liang replied to Newman's e-mail on February 26, 2016. (Union Arbitration E-mails 2). She wrote: “To request a cancellation or adjournment, please send a request to Arbitrator Maher.” (Id.). Liang then provided Arbitrator Maher's e-mail address and telephone number. (Id.). Newman claims that he “left a voicemail message for Arbitrator Maher” “[s]ometime on or after February 26, 2016” to “request[ ] an adjournment of all pending arbitrations against Port Parties.” (Newman Aff. ¶ 41). Newman requested this adjournment because, in January 2016, “federal officers confiscated all of the original records belonging to Port Parties in connection with a multi-agency investigation.” (Resp't 56.1 ¶ 50; see Newman Aff. ¶ 41). And those records, Port Parties claims, “included … employment related documents that are relevant to and needed for [ ] Port Parties's defense of the claims made by Petitioners.” (Resp't ¶ 51).

         Arbitrator Maher did not return Newman's voicemail. (Resp't 56.1 ¶ 64). For his part, Arbitrator Maher does not recall receiving a request to adjourn the Funds' arbitration with Port Parties, although he does recall receiving “a request for adjournment as to a Union [a]rbitration.” (Virginia Decl., Ex. 15, at 1 (emphasis added); see also Default Award 1-2 (noting that Port Parties made no “request for an adjournment or extension of time to appear” at the Arbitration Hearing)).

         Liang sent Newman a follow-up e-mail on March 10, 2016, writing: “Please confirm if your request for an adjournment [of] the arbitration was granted. It is scheduled for Monday, March 14, 2016.” (Union Arbitration Emails 1). Newman responded that same day: “Yes we need one.” (Id.). In this regard, Port Parties also claims that

[p]rior to March 14, 2016, [ ] Newman advised several of Petitioners' representatives, including, but not limited to [ ] Liang[;] Luke Powers, Petitioners' Employer Services Director of the NYC District Council of Carpenters (“NYCDCC”) Benefits Funds[;] John Catania, auditor for the NYCDCC Benefit Funds[;] and Stephen McInnis, Petitioners' President, that Port Parties required an adjournment of all arbitrations pending against them because they were not in possession of relevant records due to the seizure of such records by government agents.

(Resp't 56.1 ¶ 67). But as Powers explains in a signed declaration, he is the only one of the individuals whom Newman allegedly contacted that actually works as a “representative of the Funds, ” as distinguished from the Union. (Powers Decl. ¶ 12). And Powers also avers that “[a]t no point in time did [he], or anyone else from the Funds, ever consent to any adjournment of the March 23, 2016 arbitration hearings set for both Port Parties and Showtime.” (Id. at ¶ 13).

         Port Parties claims that “[o]n or about March 14, 2016, … Liang orally advised [ ] Newman that Arbitrator Maher had granted [his] adjournment request.” (Resp't 56.1 ¶ 68). Three days later, Liang e-mailed Newman to confirm that “[t]he grievances are to be continued for the arbitration date of May 24, 2016.” (Union Arbitration E-mails 1). Newman claims that after receiving that e-mail, he “was under the impression that all arbitrations pending against Port Parties had been adjourned until May 24, 2016.” (Resp't 56.1 ¶ 70). Liang, however, recalls that her “conversations with [ ] Newman were focused on adjourning the March 14, 2016 hearing concerning the [ ] Union's five grievances against Port Parties.” (Liang Decl. ¶ 7). By Liang's account, she and Newman “never discussed adjourning any arbitration hearings brought by the Funds” - indeed, Liang “do[es] not have any authority to act on behalf of the Funds.” (Id.).

         “On or about March 22, 2016” - one day before Port Parties's scheduled arbitration with the Funds - “Newman received a phone call from Petitioners' auditor, ” who asked Newman “whether he would be attending the arbitration scheduled for March 23, 2016[, ] before Arbitrator Maher.” (Resp't 56.1 ¶ 71). Newman “was confused”: It was his understanding “that all pending arbitrations against Port Parties had been adjourned.” (Newman Aff. ¶ 50). In response to the auditor's call, Newman “immediately” called Petitioners' counsel Charles Virginia, as well as Catania, McInnis, and Walker, “to remind them that Port Parties needed an adjournment of the arbitrations scheduled for March 23, 2016.” (Id. at ΒΆ 51). Newman ...


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