Demopoulos v. Curcio

DEMOS P. DEMOPOULOS, STEPHEN MALONE, and MICHAEL SPINELLI, as Union Trustees and Fiduciaries of the LOCAL 854 PENSION FUND and the LOCAL 854 HEALTH AND WELFARE FUND, Plaintiffs, v. JOHN CURCIO, WILLIAM CASSESE, and KENNETH BARRETT, as Employer Trustees of the LOCAL 854 PENSION FUND and the LOCAL 854 HEALTH AND WELFARE FUND, Defendants.

No. 2:20-cv-01208 (WFK)(PK)

United States District Court, E.D. New York

February 6, 2023

REPORT AND RECOMMENDATION

Peggy Kuo, United States Magistrate Judge

Before me on referral from the Honorable Roslynn R. Mauskopf is a Motion to Dismiss and Compel Arbitration (“Motion,” Dkt. 35) filed by John Curcio, William Cassese, and Kenneth Barrett (collectively “Defendants”) against Demos P. Demopoulos Stephen Malone, and Michael Spinelli (collectively “Plaintiffs”).

BACKGROUND

Plaintiffs are the union trustees and Defendants are the employer trustees of the Local 854 Pension Fund and the Local 854 Health and Welfare Fund (collectively, the “Funds”), which are governed by two trust agreements. (See “Pension Fund Trust Agreement,” Ex. A to Amended Compl. (“Am Compl.”), Dkt. 22-1; “Health Fund Trust Agreement,” Ex. B. to Am. Compl., Dkt. 22-2 (collectively, “the Trust Agreements”).)

At the time they filed the Complaint on March 5, 2020 (Compl., Dkt. 1), Plaintiffs moved for a preliminary injunction enjoining Defendants from seeking arbitration pursuant to a Notice of Intention to Arbitrate dated February 11, 2020 (“Feb. 11, 2020 Notice”) delivered by Defendants to Plaintiffs. (Dkt. 2.) The Feb. 11, 2020 Notice sought to arbitrate:

(1) Whether the vote during an Executive Session of the December 18, 2019 trustees meeting to remove Friedman & Anspach as counsel to the Local 854 [International Brotherhood of Teamsters (“I.B.T.”)] Pension Fund and Local 854 I.B.T. Health and Welfare Fund was proper? If not, what shall the remedy be? (2) Whether the union trustees' subsequent refusal to allow removal of Friedman & Anspach as counsel to the Local 854 I.B.T. Pension Fund and Local 854 I.B.T. Health and Welfare Plan Fund was proper? If not, what shall the remedy be?

(“Feb. 11, 2020 Notice,” Ex. E to Am. Compl., Dkt. 22-5.) Defendants opposed Plaintiffs' motion and cross-moved to compel arbitration of the matters described in the Feb. 11, 2020 Notice. (Dkts. 14-18.) I issued a Report and Recommendation, which the Honorable Roslynn R. Mauskopf adopted in its entirety, recommending that the Court deny Plaintiffs' request for a preliminary injunction and that Plaintiffs be compelled to move forward with arbitration pursuant to the Feb. 11, 2020 Notice. See Demopoulos v. Curcio, No. 20-CV-1208 (RRM)(PK), 2021 WL 799330 (E.D.N.Y. Jan. 10, 2021), R&R adopted, 2021 WL 796064 (E.D.N.Y. Mar. 2, 2021) [hereinafter Demopoulos I]. The parties selected an arbitrator (see Minute Entry dated July 13, 2021), but Defendants withdrew the case from arbitration on September 13, 2021. (See Status Report, Dkt. 42.)

As set forth in their Amended Complaint filed on March 30, 2020, Plaintiffs assert four causes of action: (1) the Feb. 11, 2020 Notice violates the Trust Agreements and is a breach of Defendants' fiduciary duties under the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. §§ 1001 et seq. (Am. Compl. ¶¶ 88-95); (2) Defendant Barrett breached his fiduciary duties under ERISA in attempting to influence the Funds' suit against Advance Transit Co. Inc, a company owned by Barrett, and in moving to remove the law firm of Friedman and Anspach (“F&A”) during an Executive Session of the Board in December 2019 (id. ¶¶ 96-106); (3) Defendants violated their fiduciary duties to act in the sole interest of the Funds' participants and beneficiaries under ERISA by sending the Feb. 11, 2020 Notice (id. ¶¶ 107-15); and (4) the Feb. 11, 2020 Notice violates the Trust Agreements, for which Section 301 of the Labor Management Relations Act of 1947 (“LMRA”), 29 U.S.C. § 185, provides Plaintiffs with a cause of action. (Id. ¶¶ 116-22.)

On April 23, 2020, Defendants filed the Motion, in which they contend that Plaintiffs' fourth claim should be dismissed under Federal Rule of Civil Procedure 12(b), and that claims one, two, and three should be arbitrated. Defendants also argue that if the fourth claim is not dismissed, it too should be arbitrated. (See Defendants' Memorandum of Law in Support of Motion (“Def. Mem. of Law”), Dkt. 36).

For the reasons stated herein, I respectfully recommend that the motion to dismiss be denied and that the motion to compel arbitration be granted as to all claims.

DISCUSSION

I. Defendants' Motion to Dismiss

Defendants argue that the Court lacks subject matter jurisdiction over the fourth claim because LMRA § 301 applies only to claims brought by or against “labor organizations” and none of the parties here is such an organization. (Id. at 6-7); see Loc. 100, Transp. Workers Union v. Rosen, No. 6-CV-4787 (RPP), 2007 WL 2042511, at *5 (S.D.N.Y. July 13, 2007) [hereinafter Rosen] (analyzing as part of jurisdiction whether the action was between an employer and a labor organization). Thus, although Defendants state that Plaintiffs' fourth claim should be dismissed under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim (see Def. Mem. of Law at 1), Defendants' arguments are more appropriately considered under Rule 12(b)(1), and I will treat the motion to dismiss as one under Rule 12(b)(1) rather than 12(b)(6). See Pungitore v. Barbera, No. 11-CV-6249 (VB), 2012 WL 2866293, at *1 n.2 (S.D.N.Y. Mar. 29, 2012) (treating defendants' motion as a motion to dismiss for lack of subject matter jurisdiction under Rule 12(b)(1), even though it was “style[d]” as a Rule 12(b)(6) motion because the arguments defendants made went to whether the court had jurisdiction over the dispute).

A. Legal Standard

“[A] claim is properly dismissed for lack of subject matter jurisdiction under Rule 12(b)(1) when the district court lacks the statutory or constitutional power to adjudicate it.” Morrison v. Nat'l Austl. Bank Ltd., 547 F.3d 167, 170 (2d Cir. 2008) (citation omitted). “A plaintiff asserting subject matter jurisdiction has the burden of proving by a preponderance of the evidence that it exists.” Id. The Court draws all ambiguities and inferences in the plaintiff's favor and “may properly dismiss a case . . . if it ‘lacks the statutory or constitutional power to adjudicate it.'” Aurecchione v. Schoolman Transp. Sys., Inc., 426 F.3d 635, 638 (2d Cir. 2005) (quoting Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000)).

B. Analysis

Plaintiffs' fourth cause of action alleges that Defendants violated Section 301 of the LMRA, 29 U.S.C. § 185, when they issued the Feb. 11, 2020 Notice, because it was in violation of the terms of the Trust Agreements.

Section 301 creates a federal cause of action for breach of a collective bargaining contract and provides:

Suits for violation of contracts between an employer and a labor organization representing employees in an industry affecting commerce as defined in this chapter, or between any such labor organizations, may be brought in any district court of the United States having jurisdiction of the parties, without respect to the amount in controversy or without regard to the citizenship of the parties.

29 U.S.C. § 185(a). As applicable here, a claim under Section 301 “must allege: 1) a violation; 2) of a contract; 3) between an employer and a labor organization.” Bannerjee v. Papadakis, 583 F.Supp. 757, 760 (E.D.N.Y. 1984). The labor organization must represent employees “in an industry affecting commerce.” 29 U.S.C. § 185(a).

Plaintiffs' allegations meet all the requirements. They assert that there was “no genuine vote or disagreement” on the replacement of the Funds' counsel F&A, and, therefore, Defendants improperly served the Feb. 11, 2020 Notice in violation of the Trust Agreements.^[1]The Trust Agreements are contracts between certain specified employers and Local Union No. 854, I.B.T. (“the Union”), which is a “labor organization” in an industry affecting commerce within the meaning of the LMRA. See 29 U.S.C. §§ 152(5), 142(1).^[2]

Contrary to Defendants' argument, Section 301 is not limited to suits between a labor organization and an employer, or between labor organizations.

Though the action in this case is between the Union and the Employer Trustees, § 301 requires that the contract be between an employer and a labor organization, not that the lawsuit be between these groups: “[i]t is well settled that parties in a § 301 action do not necessarily have to be employers or labor organizations. The word ‘between' in § 301(a) refers to ‘contracts' between an employer and a labor organization, not to ‘suits' between them.”

Rosen, 2007 WL 2042511, at *5 (alteration and emphasis in original) (quoting Painting & Decorating Contractors Ass'n of Sacramento, Inc. v. Painters & Decorators Joint Comm. of E. Bay Cntys, Inc., 707 F.2d 1067, 1069 (9th Cir. 1983)). Moreover, “section 301 jurisdiction is not limited to collective bargaining agreements,” but can also include trust agreements. Whelan v. Colgan, 602 F.2d 1060, 1061 (2d Cir. 1979); see Schneider Moving & Storage Co. v. Robbins, 466 U.S. 364, 366 n.2 (1984) (“Section 301(a) of the LMRA provides a federal forum for suits to enforce labor contracts, including pension and welfare fund agreements.”).

In Whelan, the Second Circuit rejected the argument that a district court lacked jurisdiction over a suit brought by employee trustees against employer trustees of a welfare trust fund pursuant to the LMRA. The Court held that “[t]he District Court properly took jurisdiction” of the suit under Section 301 of the LMRA, “because the employee trustees' claim for relief was...